Top REIT Investment Corporation
14th Business Report(Semi-Annual Report 14th)

November 1, 2012 – April 30, 2013

Letter from the Executive Officer of the Investment Corporation
Dear Investors,
Thank you for your continued loyal patronage to Top REIT, Inc. (Top REIT).
In the Japanese economy, there is a recent trend of improvement firstly in sentiment with expectations
for the government’s economic policies and the Bank of Japan’s bold monetary easing. However, theeffect of such on the real economy is limited as the recovery of individual consumption and the export
environment are only gradual. As for the outlook, due to further improvement of the export
environment through the steady growth of the U.S. economy and yen depreciation, increase in public
investment alongside the full-fledged implementation of the Emergency Economic Measures for the
Revitalization of the Japanese Economy, asset effect from the increase of stock prices andimprovement of consumer confidence is expected, as well as a moderate economic recovery due tothe last-minute surge in demand for housing and other durable consumer goods prior to theconsumption tax hike.
On the other hand, concerning the J-REIT market, the TSE REIT Index has been on an upward trend
since exceeding 1,000 points in late September last year starting with the Bank of Japan’s purchase of
J-REIT investment units along with the backdrop of the decrease of risk premium of J-REITs andexpected increase of asset prices, etc. due to the improvement of the credit market from the upturn ofthe external environment. In late March of this year, the index rose to 1,700 points for the first time inabout five years, but in the future, the J-REIT market is also approaching an adjustment stage as there
are unstable aspects such as the wide fluctuation of long-term interest rates due to the Bank of Japan’sbold monetary easing policy. Going forward, the partial amendment to the Act on Investment Trusts
and Investment Corporations was passed and established at the 183rd ordinary session of the Diet inthis year which will lift restrictions on J-REITs acquiring their own investment units and rights issues,and this will diversify J-REITs’ means for funding and capital policies. In addition, the Bank of Japan
will increase and continue its J-REIT purchases, and this, along with long-term interest rates
remaining at a low level despite being on an upward trend, will contribute to a generally stablefinancing environment expected to continue for J-REITs.
Under such circumstances, the financial results of Top REIT in the fourteenth fiscal period wereoperating revenue of 5,844 million yen (period-on-period increase of 3.7%), ordinary income of 1,823
million yen (period-on-period decrease of 8.9%), net income of 1,822 million yen (period-on-period
decrease of 8.9%) and dividend per unit of 11,759 yen. As for the business results in the fourteenthfiscal period, certain progress was made such as with the conclusion of a lease agreement with a new
tenant at Harumi Island Triton Square Office Tower Y utilizing the management skills of the asset
manager and collaboration with sponsor companies, as finding successor tenants for this property wasa priority issue, as well as acquiring a new urban retail property in Sendai City, Miyagi Prefecture.
While signs of recovery are gradually emerging in the real estate market, a full-fledged recovery is
expected to require a little more time. Top REIT will continue to collaborate with the asset manager
and the sponsor companies to steadily address the issues at hand while aiming to maximize unitholder
value through external growth that seizes the best opportunities. We thank you and ask for yourcontinued support and understanding.

Jumpei Norimatsu
Executive Officer
Top REIT, Inc.

2

Letter from the President of the Asset Management Company
Dear Investors,
Thank you very much for your strong support for Top REIT, Inc. (Top REIT) and our activities.
In the fourteenth fiscal period (November 1, 2012 to April 30, 2013), there was a bottoming out of therecession phase that had been caused by factors such as the decrease of exports due to the strong yen
and sluggish overseas economies. After the inauguration of the new administration at the end of 2012,
the exchange market responded quickly to the enhanced emergency economic measures resulting in
the yen depreciating. Furthermore, aided by the recovery of overseas economies centering on the U.S.,
stock prices increased in anticipation of the policies crafted by the new administration. In addition, theBank of Japan’s quantitative and qualitative monetary easing policies set forth to overcome deflation
were hammered out after the appointment of a new governor who enhanced collaboration with the
new administration which produced better results than the market had expected and favorably
impressed not only domestic investors, but also foreign investors, and accelerated the depreciation of
the yen and the increase in stock prices. An increase of J-REIT purchases has been incorporated into
this easing “of a different dimension” by the Bank of Japan and has become a factor for the favorable
fund procurement environment for J-REITs as it also underpinned the market.
However, such responses in the market are primarily in expectations and while in part there are signsof a recover in manufacturing which is experiencing strong demand in Japan and abroad, as well as
for export companies due to the yen depreciation, the impact on the real economy is still weak and theinvestment unit prices of J-REITs and stocks prices that had increased sharply are in an adjustment
phase. Going forward, while developments such as the lessening of monetary easing in the U.S. need
to be watched, it is thought that the Japanese economy will proceed at a moderate pace against the
backdrop of a recovery of overseas economies, upturn of individual consumption due to improved
sentiment and increase of public investment related to emergency economic measures among otherfactors. Regarding the real estate leasing market, the recovery is becoming clearer in newly built
high-grade office buildings in central Tokyo, but overall there is no sense of a bottoming out and it isbelieved that a full-fledged recovery of the rent level will require more time.
Under such circumstances, Top REIT positioned leasing activities for successor tenants at Harumi
Island Triton Square Office Tower Y as a priority issue and, as a result of our focus undercollaboration with the sponsors, was able to conclude a lease agreement with new a tenant as of April
24, 2013, and the property’s occupancy rate increased from 41.8% at the end of the fourteenth fiscal
period to 62.5% as of June 2013. Furthermore, a lease application was received in the fifteenth fiscal
period from another tenant and the occupancy rate is expected to increase to 68.9% in September thesame year. Also, an urban retail property in Sendai City, Miyagi Prefecture was acquired during thefourteenth fiscal period, Top REIT’s first acquisition in about a year.
As for dividend per unit in the fifteenth fiscal period (ending October 2013), the forecast dividend perunit as of December last year was 9,500 yen assuming a reversal of internal reserves of 78 million yen(49 million yen in reserve for reduction entry and 28 million yen in deferred income taxes, equivalent
to 500 yen dividend per unit), but as a result of the steady addressing various issues it raised at the
beginning of the period, forecast dividends have been adjusted to 9,700 yen after the reversal ofinternal reserves was not implemented. The details of business results for this period and future
strategies are as described hereafter.

Nobuhito Endo
President and Representative Director
3Financial Highlights

CATEGORY

14TH FISCALPERIODPERFORMANCE

15TH FISCALPERIODFORECAST(ANNOUNCED ON
June 13, 2013)16TH FISCALPERIODFORECAST(ANNOUNCED ON
June 13, 2013)

PERIOD OF ASSETMANAGEMENT

181days

184 days

181 days

OPERATING REVENUE￥5,844 million (Note1)￥5,125 million￥5,088 million

OPERATING INCOME￥2,447 million￥2,112 million￥2,105million

ORDINARY INCOME￥1,823 million￥1,504 million￥1,504 million

NET INCOME￥1,822 million￥1,503 million￥1,503 million

DIVIDEND PER UNIT

￥11,759￥9,700￥9,700NUMBER OF INVESTMENT UNITS

155,000 units

155,000 units

155,000 units

PORTFOLIO SIZE

19 properties

19 properties

19 properties

Preconditions for 15th Fiscal Period and 16th Fiscal Period Forecasts(1) Portfolio Assets
The forecast is based on 19 properties Top REIT owns as of June 13, 2013.
(2) Operating Revenue
For real estate rent revenue related to existing properties, Top REIT takes into consideration
execution of new lease agreements and cancellation of lease agreements that have been
finalized or are scheduled as of June 13, 2013, along with current real estate leasing market
conditions, as well as factors that may cause fluctuations in such aspects as risks associatedwith rent revision due to fluctuations in rent of tenants reaching their rent revision period orcontract renewal period. For Harumi Island Triton Square Office Tower Y, revenue is expected
for leased space as described in the press release “Notice Concerning Conclusion of Lease
Agreement with New Tenant” dated April 24, 2013, as well as for leasable spaces for which
execution of new lease agreements are scheduled as of June 13, 2013. Furthermore, it isassumed the occupancy rate of the property on the last day of May 2013 is 41.8%, from June 1
to the last day of August 2013 is 62.5% and from September 2013 is 68.9%.
(3) Interest-Bearing Liabilities
It is assumed that the total amount of interest-bearing liabilities is ¥96,065 million, which is theamount as of April 30, 2013. For the fifteenth and sixteenth fiscal period, it is assumed that the¥67 million in long-term loans payable will be repaid as agreed upon.
(4) Dividend per Unit
With regard to the internal reserves of 78 million yen (49 million yen in reserve for reduction
entry and 28 million yen in deferred income taxes), Top REIT will not reverse the amount ofinternal reserves for the fifteenth and sixteenth fiscal period.
(Note 1)

(Note 2)

It is assumed that the ¥451 million as income equivalent to expenses for restoring the property
to its original state in accordance with the relocation of a major tenant from Harumi Island
Triton Square Office Tower Y is recorded as operating income, and the same amount isrecorded as operating expenses
The above forecast figures are calculated under certain preconditions as of June 13, 2013 andare subject to change. Moreover the forecasts should not be construed as a guarantee of thedividend amount.

4Footholds for the Next Stage ~ Step to Growth ~1. Accumulate greater revenues by addressing various issues steadily(1) Overview and Achievement of Priority Issues
Top REIT was forced to post a decrease of forecast dividends in its business results forecasts forthe fourteenth fiscal period and in particular the fifteenth fiscal period (ending October 2013) asa decrease in Harumi Island Triton Square Office Tower Y’s occupancy rate was inevitable dueto the lease agreement termination notice received from a major tenant, etc., and the termination
date having arrived during the fourteenth fiscal period. With this, Top REIT conductedmanagement with a recognition of the below four items as priority issues. The status of progresson these matters is also stated below. Top REIT believes that in the fourteenth fiscal period it wasable to steadily address various issues it raised at the beginning of the period to secure revenues,
while laying the foundation for recovering revenues with the dividend level for the fifteenthfiscal period set as the bottom (for details see pages 5 through 14).
Priority Issues

Achievement of Priority Issues (as of June 13, 2013)①

Solicitation of successor tenants toHarumi Island Triton Square Office Tower Y･Contracts concluded with 3 tenants for approx. 1,534 tsubos(including expansion of existing 2 tenants’ for approx.80 tsubos)
in 14th FP･Received a lease application for approx. 443 tsubos in 15th FP
from one tenant・occupancy rates：41.8% (after the move-out of the major tenant )→ 62.5% (Jun. 2013) → 68.9% (Sep. 2013)②

Minimize range of decrease in large scale
rent revision

Agreed within estimated ranges of rent reduction in large scale
rent revision (approx.25% of total rents in portfolio) by conducting
persistent negotiations③

Accumulate greater revenues
by acquisition of new properties

Acquired an urban retail property located in Sendai City, Miyagi
Prefecture by utilizing brokerage networks of Sumitomo Mitsui
Trust Bank, Limited (main sponsor)④

Well-balanced refinancing
while reducing costs

Conducted borrowings steadily through syndicated loans formed
primarily by three major megabanks and leading trust banks,and continued stable transactions with such financial institutions.

(2) Outlook on Business Results for the Fifteenth and Sixteenth Fiscal Periods
Forecast dividends for the fifteenth fiscal period (ending October 2013) (A) announced at theannouncement of the thirteenth fiscal period’s financial results were 9,500 yen per unit andassumed a reversal of internal reserves of 78 million yen (49 million yen in reserve for reduction
entry and 28 million yen in deferred income taxes, equivalent to 500 yen dividend per unit).
However, as a result of steadily addressing priority issues as stated above, Top REIT was able topresent forecast dividends with an increase to 9,600 yen per unit (B) without implementing thereversal of internal reserves in the fourteenth fiscal period, and subsequently forecast dividends
were increased to 9,700 yen per unit (C) due to further accumulation of revenues. The sameamount of 9,700 yen dividends per unit is forecast for the sixteenth fiscal period (ending April2014) (C) as of now, but Top REIT will continue to maintain a position of thoroughly prioritizing
the dividend level while focusing on the issues at hand such as solicitation of tenants for Harumi
Island Triton Square Office Tower Y, and will seek to recover the dividend level such as throughthe acquisition of new properties in order to further increase dividends. For the preconditions forbusiness results forecasts and forecast figures such as operating revenue for the fifteenth andsixteenth fiscal periods, please see page 4.

5

A

B

Forecast
Forecast on
on businessbusiness results
results andanddividends
dividends forfor thethe 14th
14th FPFP andand 15th
15th FPFP(Announced(Announced on
on Dec.
Dec. 14,
14, 2012)
2012)（ yen）
12,00011,500

Revision
forecast on
on
Revision ofof forecast
businessand dividends
dividends
business results
results andforfor thethe 15th
15th FPFP(Announced(Announced onon Apr.
Apr. 24,
24, 2013)
2013)（ yen）
12,000

Reversal ofinternal
reserves*

11,500C

Earning
Earning results
results forfor 14th
14th FPFP andandforecast
forecast on
on businessbusiness result
result andanddividends
dividends forfor thethe 15th
15th FPFP andand 16th
16th FPFP(Announced(Announced on
on Jun.13,
Jun.13, 2013)2013)

Forecasts a period-onperiod increase byaccumulating greater
revenues（ yen）
12,0009,600

10,00011,759

Accumulate
furthergrater revenues
9,700

9,500

10,00010,000

700

600

500
8,000

8,000

8,000

Based onactual earnings¥9,000

6,000

4,000
14th FP（forecast）

Note1:
Note2:

15th FP（forecast）

9,700

Based onactual earnings¥9,600

6,000

4,000

6,000

4,000
14th FP（forecast）

15th FP（forecast）

14th FP（result）

15th FP（forecast）

16th FP（forecast）

Internal reserves : reserve for reduction entry and accompanying income taxes deferred
The above forecast figures announced on June13, 2013 are calculated under certain preconditions and are subject
to change.

(3) Efforts in Priority Issues ①~ Status of Soliciting New Tenants to Harumi Island Triton Square Office Tower Y ~Since receiving the termination notice from Nippon Steel & Sumitomo Metal Corporation,
formerly a major tenant at Harumi Island Triton Square Office Tower Y, Top REIT has worked tofind successor tenants for the property as a priority issue in collaboration with sponsors and theproperty management company. As already explained, during the fourteenth fiscal period, whilesome light could be seen with regard to the future of the economy, ripple effects such as forpromoting employment and business expansion has not yet materialized in the real economy, andas such companies are still maintaining their careful stances. Also, with a standard floor space ofabout 565 tsubos, relocation to Harumi Island Triton Square Office Tower Y is a relatively major
undertaking for potential tenants and therefore much time is required for consideration.
As for achievements during the fourteenth fiscal period, against this backdrop, floor area wasincreased for two existing tenants (approx. 80 tsubos) and one tenant companies concluded lease
contracts (approx. 1,454 tsubos). Therefore, Top REIT’s activities resulted in concluding leaseagreements with three tenants for a total of approx. 1,534 tsubos (36.9% of the area for which
new tenants are being sought). The property’s occupancy rate which was 41.8% after the
move-out of the major tenant, etc. increased to 62.5% as of June 1, 2013. Furthermore, as a leaseapplication for approx. 443 tsubos was received in the fifteenth fiscal period from one tenant, theoccupancy rate is expected to increase to 68.9% in September 1 2013. Of these, rent-free periods
have been established that exempt payment of rent, etc. for a certain period of time for the leaseagreements with two new tenants to which a total of approx. 1,897 tsubos will be leased
reflecting the recent real estate leasing market conditions. However, since the contract form issuch that the total rent for the contract period will be averaged out in the contract period andrecorded as revenue, the rents will be contributing to dividends from the start of the leaseagreement.

6

As the tenants who have concluded (or are scheduled to conclude) lease agreements and otherpotential tenants who are currently considering moving in have highly evaluated the property for
its high specifications, earthquake resistance, etc. that compare favorably with the latest officebuildings, Top REIT was reaffirmed of the property’s strengths through leasing activities ofsucceeding tenants. Also, as renewal work is being conducted for the common areas such as
elevator halls, hallways, restrooms and such on floors that have been vacated, this is believed to
be further boosting future leasing activities.

Elevator hall

Women’s restroom

Top REIT will continuously focus on leasing activities toward succeeding tenants for Harumi
Island Triton Square Office Tower Y and complete entire lease up of the building as soon as
possible with an aim for early recovery of dividend level.
＜Leasing Situation＞
Jan.
2013

Feb.
2013

Mar.
2013

Apr.
2013

May.
2013

Jun.
2013

Jul.
2013

Aug.
2013

Sep.
2013

Occupancy rate (%)

100.0

66.7

49.9

41.8

41.8

62.5

62.5

62.5

68.9

Vacancy space(tsubos)

0

2,340

3,515

4,079

4,079

2,625

2,625

2,625

2,182

Number of
total tenants

7

7

6

3

3

4

4

4

5

Note:

Figurers are actual until the end of May 2013, and are as of June 13, 2013 from the end of June 2013.
Vacancy space (tsubos) : Rounded down to the nearest decimal(4) Efforts in Priority Issues ②~ Result of Large-Scale Rent Revision ~While the financial results of Japanese companies in the fourth quarter of fiscal 2012 showed
clear recovery in some export industries such as the automobile industry, an overall recovery is
yet to be achieved. Companies are emphasizing focus on further cost reductions and tenants
continue to request reduced rents upon rent revisions. The real estate leasing market with its
delayed recovery compared to the recovery of the economy continues to be in a state ofstagnation.
Under such circumstances, and as the fourteenth fiscal period qualifies as one in which biennial
large-scale revisions of rents are made, rent revisions took place mainly at part of Harumi Island
Triton Square Office Tower Y, Office Tower Z and Kanda Nishiki-cho 3-chome Building alongwith other properties which in total account for about 25% of the portfolio. As a result of
persistent negotiations, rent remained unchanged in five cases and decreased in seven cases, withan average decrease of 7.5%, within the range of what was expected.

7

(5) Efforts in Priority Issues ③~ Accumulation of Revenues through the Acquisition of New Properties ~In the fourteenth fiscal period, while focusing on leasing activities for vacant spaces as well as on
the large-scale rent revision, Top REIT worked toward recovering the dividend level through theacquisition of new properties to compensate for the deterioration of revenues.
There is very little information on sales of office buildings in the current real estate transaction
market and for a long time there has been a gap between the price perspectives (level) of buyers
and sellers. Also, while transactions of rental residential properties are strong, it is somewhat
overheated and prices are rising (yields are decreasing).
In order to acquire competitive prime properties in this environment, Top REIT has beengathering information on sales of a wide variety of asset classes, not only office buildings ofcentral Tokyo and other major cities, based upon sophisticated analysis of the markets of each
asset class and by utilizing the sponsors’ brokerage function and Top REIT’s unique and diverse
information channels that it has fostered throughout the years. As a result, Top REIT acquired theurban retail property MEL Building located in Sendai City, Miyagi Prefecture through thebrokerage function of one of its sponsors, Sumitomo Mitsui Trust Bank, Limited.
Among retail properties, MEL Building is classified as an urban retail property. This is Top
REIT’s first time to acquire such a property. MEL Building is located in a lively commercial area
in central Sendai where there is a concentration of leading-edge fashion brands andreconstruction has made steady progress. MEL Building is a major retail property in this area andtenants include Quil Fait Bon, a sweets cafe popular with a wide range of ages which also has
shops in the Aoyama, Daikanyama, Ginza areas of Tokyo among other places, as well as WEGO
which is very popular especially among young people, and the property hosts a lineup of tenants
that are appropriate for this area who are able to attract a corresponding amount of customers.
While the property is rather old, it underwent seismic retrofitting and full-scale renewal in 2005
and has the level of facilities that should satisfy requirements from tenants. Moreover, since thetime from around eight years ago when it was converted from an office property to a retailproperty, five out of six of the current tenants have been occupying the property, hence, thestability of the trade area is verified and it is thought that stable occupancy can be expected going
forward.
＜MEL Building (urban retail property)＞
Address
Acquisition PriceArea( Land / Building )Completion

Appraisal ValueNOI yield / Cap Rate

Note:

2-7-28 Chuo, Aoba Ward, Sendai City,
Miyagi Prefecture¥1,210 million （April 30, 2013）895.66㎡／1,756.32㎡(RC with a flat roof, 3 floors above ground)Jan 1980 （extended in July 2005）*May 2005: earthquake-proof reinforcement
construction work
July 2005: remodeling construction workchange of intended purpose of a building.
¥1,260 million (as of April 1, 2013)
Daiwa Real Estate Appraisal Co., Ltd.
Assumed NOI yield : 7.6 ％（note）/
Cap Rate (through Direct Capitalization
Method) : 6.2％

The assumed NOI is the difference between the assumed rental revenue and the assumed rental expenses,
which respectively represent the operating revenues and the operating expenses of the property for the initialyear, calculated by the DCF method described in the real estate appraisal report prepared upon the acquisition.
The assumed NOI yield is obtained by dividing the difference by the acquisition price.

~ Key Points of the Acquisition ~1

Though small in size, produces high yield to contribute to dividends

2

Located in central Sendai City that has energy with reconstruction from the earthquake proceeding in good order3

Located in an area having a concentration of leading-edge fashion brands to enjoy high potential as a commercial district

4

Has tenants comprising popular sweets and cafe shops, select second-hand clothing shops and casual brand shops, etc.,
which is expected to attract many customers

5

Although rather old, the building has the level of facilities that should satisfy requirements from tenants as it underwent
seismic retrofitting and full-scale remodeling of facilities

82. Future Management Policy and Strategy
As explained, Top REIT steadily addressed issues at hand and adjusted dividend forecasts upward
during the fourteenth fiscal period. However, as the recovery of dividends is still in progress, Top
REIT will continue to focus on the issues and secure revenues while at the same time lay thegroundwork for growth.
(1) Current Facing Issues
Approx. 2,182 tsubos is still vacant at Harumi Island Triton Square Office Tower Y as of June 13,
2013 (approx. 31% of the property’s total leasable floor area). Top REIT will focus on leasing
activities to find successor tenants for the vacant space in collaboration with sponsors such as bycontinuing to communicate with potential tenants that are considering moving in and will work tobring the property to full occupancy as soon as possible to secure revenues.
In addition, at Sagamihara Shopping Center, the lease agreement with tenant Ito-Yokado willreach maturity during the fifteenth fiscal period (ending October 2013). In negotiating the next
contract period and lease terms and conditions such as rent, Top REIT will use its excellent
relationship it has cultivated with tenants and negotiate persistently. Furthermore, rent revision for
NEC Corporation, the tenant of NEC Head Office Building, will take place in the sixteenth fiscal
period (ending April 2014). The lease agreement with NEC Corporation is a fixed-term leaseagreement which lasts until December 2025 and termination before maturity is prohibited until
December 2017. Additionally, the first rent revision since acquisition will take place in January
2014 and the rent will be fixed from then to December 2017. Provisions that reduce the risk ofrent volatility have already been incorporated in the rent revision and it is believed that therevision will go smoothly.
(2) Step to Growth
Against the backdrop of a favorable fund procurement environment, the real estate transaction
market has since the beginning of the year shown signs of recovery such as with the transactionsof large-scale properties owned by general companies, but the gap between price perspectives(level) of sellers and buyers is ongoing as is the limited information on sales of properties. Under
these circumstances which make property acquisitions difficult, Top REIT has positioned thefifteenth and sixteenth fiscal periods as periods for the “Step to Growth” where it will focus on theacquisition of prime properties with office buildings as the core but also with sophisticatedanalysis of the markets for each asset class. Also, Top REIT will continue deliberating on thereconstruction of a sponsor structure that will contribute to its growth under collaboration with thesponsors. Furthermore, the current investment stance for each asset class is as below. Top REIT
will conduct management with the aim of maximizing unitholder value through the proactive
acquisition of prime properties that will contribute to the stability and growth of the portfolio.

Major three asset classes

OfficeOther
thanofficeRetailResidential

TargetConstruct a portfolio primarily focused on office buildings
with excellent locations in Central Tokyo and other major cities
Narrow down acquisition targets to urban retail properties andfood supermarket in the three major metropolitan areas and othermajor cities
Carefully investigate acquisitions as transactions tend to getoverheated although rents and occupancy rates are expected
to remain stable going forward

9

Investment
attitude◎

Investment
ratio
Approx.
75%○△

Approx.
25%

Top REIT has completed the large-scale rent revision in the fourteenth fiscal period, and the risksof rent revisions for the fifteenth and sixteenth fiscal periods are also reflected in the forecasts on
business results. Going forward, Top REIT will secure revenues by soliciting successor tenants forvacant spaces which is a priority issue, as well as lay the groundwork to accomplish the NEXT
STAGE (asset size of 210 billion yen) in order to add to the forecast dividends for the sixteenthfiscal period as of June 13, 2013. To our unitholders, we ask for your continued support andunderstanding.
Earning
Earning results
results forfor 14th
14th FPFP andand forecast
forecast ononbusinessbusiness result
result andand dividends
dividends forfor thethe 15th
15th FPFP
andand 16th
16th FPFP as
as ofofannounced
announced on
on 14th
14th FPFP（yen）

12,00011,75910,000

Determination
Determination totoadd
add something
something extra
extra

Bottom Out

9,700

9,700 +α

15th FP（forecast）

16th FP（forecast）

8,000

6,000

4,000
14th FP（result）

Note:

The above forecast figures are calculated under certain preconditions and are subject to change.

10

Property Highlight

Acquired an urban retail property~ the first such property for Top REIT

MEL Building(urban retail property)

Utilizing Sponsor Strengths
Acquisition by utilizing brokerage
networks of Sumitomo Mitsui Trust
Bank, Limited.
A representative property in an area thathas a concentration of tenants as seen in
Harajuku or Daikanyama in Tokyo, suchas street casual fashion and select shops,
and foreign high-grade brands as seen in
Ginza and Aoyama, etc

Five out of the six existing tenants have been housed since the use was changed to retail facility.

With the tenants housed for approximately 8 years,
the property is expected to continue stable occupancy.
(Full occupancy as of June 13, 2013)

Quil Fait Bon

HARE

45R

XanaduRAYVIS

WEGO

11Financial Standing
The introduction of the new monetary easing policy, both in terms of quantity and quality, by the
Bank of Japan (BOJ) targeting to achieve a 2% increase in consumer prices led to rising stock prices.
However, against the backdrop of the massive purchase of government bonds by the BOJ and removalof its restriction on their issue year and maturity, there have been repeated violent fluctuations in thecredit market and the long-term interest rates, eventually leading stock prices into an adjustment phase.
As such, the financial market has shown somewhat unstable movement. However, the long-term
interest rates still remain at a low level and the short-term interest rates continue to be low in a stablemanner, while the financial institutions Top REIT does business with maintain a positive lending
attitude. These factors continue to provide a generally favorable financing environment.
During the fourteenth fiscal period, Top REIT had 9.8 billion yen and 12.1 billion yen in loans
payable due for repayment in November 2012 and March 2013, respectively, and refinanced themsmoothly. In addition, Top REIT newly borrowed 1.23 billion yen to fund the new property
acquisition conducted in April 2013. As a result of these financing activities aimed at reducing interest
costs and extending the average remaining period of borrowings, the balance of interest-bearing
liabilities totaled 96.07 billion yen and the ratio of interest-bearing liabilities to total assets (LTV) was
51.4% at the end of the fiscal period.
(1) ¥9.8 billion Repayment date in November 30, 2012
Refinanced ¥9.8 billion (2-year-10-month floating-rate)⇒ Refinanced ¥7 billion into 2-year-10-month long-term loan payable and ¥2.8 billion into
4-month short-term loan payable (both floating-rate)(2) ¥12.1 billion Repayment date in March 27, 2013
Repaid ¥2 billion using cash on hand and refinanced ¥10.1 billion (5-year fixed-rate and 4-monthfloating-rate)⇒ Refinanced ¥4.67 billion into 5-year long-term loan payable (floating-rate),¥2.355 billion into 5-year long-term loan payable (fixed-rate) and¥3.075 billion into 2-year-6-month long-term loan payable (floating-rate)(3) ¥1.23 billion New borrowing upon new property acquisition (April 30, 2013)
Borrowed 5-year floating-rate loan payable
Extending Average Remaining Period of Interest-bearing Liabilities
Adopting a financial policy that is based on stable financial management, Top REIT has continued to
implement prudent and solid financial operations. In doing so, it has endeavored to extend theaverage remaining period of interest-bearing liabilities, which stood at 3 years and 3 months as of theend of the fourteenth fiscal period (April 30, 2013). As shown below, Top REIT has extended theperiod in a steady manner since the end of the eleventh fiscal period. Although the averageremaining period is expected to be reduced temporarily because there are no borrowings that will aredue for repayment in the fifteenth and sixteenth fiscal period, Top REIT will remain committed to
implementing stable financial operations.
Maintaining Stable Bank Formation
Since listing, Top REIT has conducted borrowings through syndicated loans formed primarily by
three major megabanks and leading trust banks, and continued stable transactions with such financial
institutions.

12Reducing the Ratio of Fixed-Rate Interest Borrowings
As of the end of the fourteenth fiscal period, the ratio of fixed-rate interest borrowings fell below
50% to 44.1%. The decrease resulted from working to reduce interest costs by taking advantage ofthe interest rates of short-term loans payable, which serve as the base of borrowing interest rates,
remaining stable at a low level, in an effort to cope with the decrease in earnings due to move-outs oflarge tenants and other factors. Nevertheless, a certain degree of risk was mitigated by extending theremaining period of interest-bearing liabilities. Going forward, Top REIT will continue closemonitoring of the trends in the market interest rates and, taking into account the future risk ofinterest rate fluctuations, work to raise the ratio of fixed-rate borrowings interest rates are set to rise.
Future Financial Operations
In its financial policy, Top REIT has placed the ceiling of the ratio of interest-bearing liabilities tototal assets (LTV) at 60%, and targets to set the figure at around 50% in ordinary management. The
LTV was 51.4% at the end of the fourteenth fiscal period, reaching a relatively high level. However,
it is essential for Top REIT to acquire new properties in order to accumulate greater earnings andrecover its dividends. To do so, Top REIT will consider the possibility of temporarily raising LTV byborrowing new funds from banks. The investment unit prices of J-REITs have remained strong since
early autumn last year, leading to new listings and new issuance of investment units being conductedactively by J-REITs. Given this situation, Top REIT will take into account a possible capital increase
through public offering of investment units to solidify its foundations for growth, as explained above.
However, the basic stance of Top REIT in implementing public offerings is to make investigations
after fully considering the market conditions, cap rates of properties to be newly acquired and otherfactors, in order to minimize the impact of dilution in its commitment to be considerate of existing
investors. While it is essential for Top REIT to conduct public offerings to achieve the NEXT
STAGE (with the target asset size of 210 billion yen) it pursues, Top REIT will maintain its solid
financial operations placing weight on the dialogue with the market.
＜Average Remaining Period of Interest-bearing Liabilities＞

11th FP

12th FP

13th FP

14th FP（as of Oct. 31, 2011）（as of Apr. 30, 2012）（as of Oct. 31, 2012）（as of Apr. 30, 20132013））

2 years

2 years &7 months

3 years

3 years &3 months＜Spread Out Repayment Dates＞
million yen
25,000*Scheduled repayment of 67.5 million yen
each period between 14th FP and 21th FP

20,000

6,700
3,075

New procurementof 1,230 million
yen for acquisitionof new property

15,0002,800

10,000No. 1 Unsecured
Investment
Corporation Bonds

7,000

19,04017,50016,700

3,000

1,230
2,355

5,000

9,800

8,500

Long-Term

6,300
4,000

3,000

-

14th FP

4,670
1,823

15th FP 16th FP 17th FP 18th FP 19th FP 20th FP 21th FP 22nd FP 23rd FP 24th FP

13

Short-Term

Long-Term
Long-Term

＜Manage Risk of Fluctuating Interest Rates＞
・Ratio of Long – Term Loans
100%

7.1%

7.1%

92.9%

92.9%

16.2%
80%

60%

40%

83.8%

100.0%

100.0%

100.0%

100.0%

100.0%

Floating

20%

Fixed

0%
7th FP

8th FP

9th FP

10th FP

11th FP

12th FP

13th FP

14th FP・Ratio of Loans with Fixed Interest Rates
100%

80%

37.9%
52.8%

52.8%

47.3%

47.4%

49.0%

49.1%

47.2%

47.2%

52.7%

52.6%

51.0%

50.9%

55.9%

60%

40%

62.1%
20%

44.1%

ShortTerm
LongTerm0%

7th FP

8th FP

9th FP

10th FP

11th FP

12th FP

13th FP

14th FP＜Changes in Fund Procurement Status (Debt)＞
Short-Term

LTV(billion yen)

Long-Term

120

60%
47.4%

100
37.1%

80
60

27.8%

37.3%

10.3

47.3%

9.3

47.3% 47.3%

13.3

50.5%

6.7

6.7

50.5%

50.7%

51.5%

51.4% 51.4%
50%
40%

13.3

28.0%

30%
20.9

40

50.6%

87.5

2.5

72.7

72.7

68.5

87.5

94.1

94.0

97.0

96.9

96.1

68.5

20%

54.4
20

10%

33.4

33.4

33.4

IPO

1st FP 2nd FP 3rd FP 4th FP 5th FP 6th FP 7th FP 8th FP 9th FP 10th FP 11th FP 12th FP 13th FP 14th FP

0

0%

14

I.

ASSET MANAGEMENT REPORT【1】Overview of Asset Management Operation
1. Operating Results and Financial Position
Fiscal period

10th

11th

12th

13th

14th

As of/for six months endedApril 30,
2011

October 31,
2011

April 30,
2012

October 31,
2012

April 30,
2013

(1) Operating results
Operating revenue(Of which, rental revenue)
Operating expenses(Of which, expenses related to rental
business)
Operating income
Ordinary income
Net income(2) Assets, etc. (end of period)
Total assets(Period-on-period variation)
Interest-bearing liabilities
Net assets(Period-on-period variation)
Unitholders’ capital(3) Cash distributions
Total cash distributions
Dividend payout ratio(4) Per unit information
Number of units
Outstanding
Net assets per unit
(Note 2)
Dividend per unit
(Earnings distribution per unit)(Distribution in excess of earnings
per unit)(5) Financial indices
Ratio of ordinary income tototal assets (Note 3)
Ratio of net income tounitholders’ equity (Note 3)
Ratio of unitholders’ equity tototal assets(Period-on-period variation)
LTV
Rental NOI (Note 4)(6) Other referential information
Number of properties at end of period
Number of tenants at end of period(Note 5)
Total rentable area at end of period
Occupancy rate at end of period(Note 6)
Depreciation and amortization at endof period
Capital expenditure at end of period

mn yenmn yenmn yen

5,967
5,967
2,995

5,812
5,812
3,033

5,693
5,437
2,921

5,636
5,636
2,939

5,844
5,844
3,397

mn yen

2,414

2,479

2,383

2,384

2,848

mn yenmn yenmn yen

2,971
2,194
2,157

2,779
1,986
1,985

2,772
2,029
1,999

2,697
2,002
2,001

2,447
1,823
1,822

mn yen%mn yenmn yen%mn yen186,336(−0.1)
94,10584,418(−0.0)
82,260185,459(−0.5)
94,037
84,245(−0.2)
82,260188,407(1.6)
96,97084,259(0.0)
82,260188,440(0.0)
96,90284,304(0.1)
82,260187,003(−0.8)
96,065
84,127(－0.2)
82,260mn yen
%

2,157
100.0

1,985
100.0

1,949
97.5

2,001
100.0

1,822
100.0

units

155,000

155,000

155,000

155,000

155,000yen

544,632

543,520543,610

543,900

542,758

yen
yen

13,922
13,922

12,80912,80912,577
12,577

12,912
12,912

11,75911,759

yen

－

－

－

－

－

%

1.2 (2.4)

1.1 (2.1)

1.1 (2.2)

1.1(2.1)

1.0(2.0)%

2.6 (5.2)

2.4 (4.7)

2.4(4.8)

2.4(4.7)

2.2(4.4)

%

45.3
(0.0)

45.4
(0.1)

44.7
(−0.7)

44.7
(0.0)

45.0
(0.3)

%
mn yen

50.5
4,639

50.7
4,393

51.5
4,126

51.4
4,368

51.4
4,117

cases

15

17

18

18

19

cases

46

48

40

42

39

m2

291,627.72

295,215.03

300,294.23

300,294.23

301,825.87

%

99.7

97.3

98.5

99.2

94.5

mn yen

1,086

1,060

1,072

1,116

1,121

mn yen

464

234

442

108

443

Note 1: Operating revenue, etc. do not include consumption taxes.
Note 2: Net assets per unit have been rounded to the nearest yen.
Note 3: The indices above are calculated using the following formulas. In addition, annualized figures derived from the management period are
indicated in brackets.
Ratio of ordinary income to total assets ＝ Ordinary income /((Total assets at beginning of period＋Total assets at end of period)/2)×100
Ratio of net income to unitholders’ equity ＝Net income/((Net assets at beginning of period＋Net assets at end of period)/2)×100
Note 4: Rental NOI (Net Operating Income) ＝Rental revenue－Expenses related to rental business＋Depreciation and amortization.
Note 5: Number of tenants at end of period indicates total number of tenants of each property as of the end of period. In the case a master leaseagreement is concluded, it is counted as 1 tenant. In the case 1 tenant rents multiple units, it is counted as 1 tenant if the units are in the same
property and as multiple tenants if the units are in multiple properties.
Note 6: Occupancy rate at end of period＝Total leased floor areas at end of period/Total leasable floor areas at end of period
When a pass-through type master lease agreement has been concluded, the area subleased to the end tenants have been used as the leased
floor area.
Note 7: Unless otherwise mentioned in the report, fractions of figures not indicated are rounded off for monetary amounts and rounded for ratios.

15

2. Overview of Asset Management Operation for the Fourteenth Fiscal Period
A. Brief Background of Top REIT
Top REIT, Inc. (Top REIT) was founded on November 2, 2005 based on the Act on Investment Trusts
and Investment Corporations (Act No. 198 of 1951, as amended) with Top REIT Asset Management Co.,
Ltd. (Asset Manager) as the incorporator, and listed on the Real Estate Investment Trust Section of theTokyo Stock Exchange (TSE) (Securities Code: 8982) on March 1, 2006 with the number of investment
units issued and outstanding totaling 145,500 units. Later, Top REIT issued additional investment units(9,500 units) through a third-party allotment on March 23, 2006. As of the end of the fourteenth fiscal
period (April 30, 2013), the total number of investment units issued and outstanding stands at 155,000
units.
Top REIT works to conduct management with the aim of maximizing the investment value for its
unitholders by securing stable revenues over the medium to long term and achieving steady growth of its
portfolio. To do so, Top REIT focuses on the two strategies of “skilled management of a diversified
portfolio” and “optimal application of the sponsors’ strengths.” As of the end of the fourteenth fiscal
period, its portfolio consists of 19 properties with a total acquisition value of ¥185,555 million.
B. Investment Environment and Management Performance<Investment Environment>(a)Economy in General
The Japanese economy turned to positive growth from the third quarter of fiscal 2012 due in part to theexport industry improving as a result of correction of the appreciation of the yen and rise in stock prices
since inauguration of a new administration at the end of 2012, and such has heightened expectations for
economic recovery. However, with a strong aspect of expectations preceding progress, the correction of
the appreciation of the yen and high stock prices have yet to lead to increase in new capital investment
and employment, increase in wages or other definite corporate movements, but rather have had limited
impact on the real economy. Furthermore, the financial market is showing signs of instability, such as
wild fluctuations in long-term interest rates due to the Bank of Japan’s massive purchases of Japanese
government bonds and abolition of maturity limits for purchases and the market entering a correction
phase of rapid movements toward depreciation of the yen and high stock prices. Consequently, theJapanese government’s implementation of a growth strategy for stimulation of the economy andpromotion of financial soundness and the movements toward withdrawal from monetary easing in the
U.S. are being watched. While facing the risk of fluctuations in long-term interest rates, the prospects
are further improvement in the export environment through pickup in the overseas economy anddepreciation of the yen, as well as increase in public investment with the full-scale implementation of
emergency economic measures. In addition, last-minute surge in demand for housing and otherconsumer durables prior to the consumption tax hike is also likely to generate through the second half ofthe fiscal year. These lead to expectations for moderate economic recovery.
(b)Real Estate Leasing Market[Office Buildings]
With expectations for economic growth increasing, some companies showed movement to lease more
floor area within the same property upon a review of the offices that were strongly undersized fromhaving largely reduced space in the wake of the Lehman Shock. In addition, relocations from old
buildings and loss of old buildings since the Great East Japan Earthquake kept supply down. The
vacancy rate of office buildings in central Tokyo thus trends toward moderate improvement. On theother hand, the rent level in central Tokyo showed signs of bottoming or having bottomed out for somelarge-scale office buildings that are relatively new and have high specifications. However, with many
office buildings forced to continue rent adjustment owing to tenant relocations causing increase invacancies and other reasons, an overall sense of bottoming out is yet to be seen. Only slowly after
full-fledged recovery of corporate earnings is it reflected in office building rent as hitting bottom or
recovering further and so is thought to take some time yet.

16[Retail Properties]
Fiscal 2012 retail store sales value increased year-on-year for the first time in two years. This was
mainly attributable to increase in motor vehicles retail sales and increase in food and beverages retailsales due in part to brisk convenience store sales, which were from the effects of the eco-car subsidy
program, on the rebound of the impact of the Great East Japan Earthquake, etc. Currently, too, the asset
effect, such as high stock prices, have led to consumer confidence being on a trend of improvement andstrong movement being found in high-price goods and consumer durables mainly among the wealthy. In
the medium to long term, however, large growth of the domestic retail market is thought to be unlikely
in light of decrease in the population and other factors. Under such circumstances, major retailers are
forecast to accelerate mergers and business alliances in view of strengthening the management base tosurvive the competition that is intensifying not only with other companies within the same industry but
also online operators that are leading the ever-growing e-commerce market. This calls for a close watchof future trends.
[Residential Properties]
New supply in 2013 will be slightly more than 2012 when there was the impact of the Great East Japan
Earthquake, but will be limited to supply in highly convenient locations and thus is expected to remain
at a low level. On the other hand, while decrease in the young, a high proportion of which reside inrental properties, will serve as a downward pressure, demand is forecast to gradually increase due tosuch factors as population influx to large cities, division of households and decrease in the capacity toacquire for-sale housing. Therefore, supply-demand balance in major cities is generally forecast tocontinue to remain unchanged and rent is forecast to also remain stable.
(c) Real Estate Transaction Market
The number of transactions overall is on the rise because, while information on transaction properties
available for sale are in short supply, there was a series of cases of acquisition of a large number ofproperties resulting from new listing or capital increase through public offering by J-REITs backed by afavorable financing environment, as well as high-price sales transactions of large-scale office buildings
owned by major manufacturers. Acquisition of real estate by J-REITs is forecast to continue to increase,but there will be no large increase in sale properties distributed to the real estate market because buyers
are assumed to remain selective and movement to sell quickly will become limited with easing of thefinancial environment. As a result, the supply-demand situation is forecast to still remain tight.
<Asset Management Performance >(a)Acquisition and Disposition of Assets
Top REIT began the fourteenth fiscal period with 18 properties (total acquisition value: ¥184,345
million). With an aim to acquire highly-competitive and highly-profitable properties, Top REIT
considered possible acquisition of properties through not only the “optimal application of the sponsors’
strengths” but also by utilizing established information channels to collect and carefully select fromproperty sale information, with excellent office buildings located in central Tokyo at the core, as well asother asset classes, by drawing on the characteristics of being a diversified REIT. By doing so, Top
REIT acquired MEL Building, an urban retail property located in Sendai City, Miyagi Prefecture for¥1,210 million. Thus, the number of properties owned by Top REIT expanded to 19 properties (totalacquisition value: ¥185,555 million) as of the end of the fourteenth fiscal period.
(b)Management and Maintenance of Portfolio Assets
The basic asset management strategy of Top REIT centers on sustaining and increasing revenue over the
medium to long term by maintaining and improving tenant satisfaction (the “Tenants First” policy) andkeeping operational management costs at an appropriate level. Top REIT strived to improve tenantsatisfaction by sustaining relationships of trust with tenants and discerning tenant needs via property
management companies in order to maintain and improve high occupancy rates.
Particularly in the fourteenth fiscal period, positioning solicitation of successor tenants to Harumi Island
Triton Square Office Tower Y as a top priority issue, Top REIT focused on tenant solicitation activities.
Despite conducting solicitation activities under still harsh real estate leasing market conditions, certain
results managed to be achieved, such as executing lease agreements for about 1,534 tsubos with threetenants, including those contracting to lease more floor area within the same property, and theoccupancy rate, which was 41.8% after the exit of the major tenant, also improved to 62.5% at the endof June 2013. In addition, at Faret East Building, execution of a lease agreement for the about 180
17

tsubos that had been vacant resulted in full occupancy from May 1, 2013. Top REIT is continuously
focusing on successor tenant solicitation and leasing activities.
Regarding maintenance, Top REIT followed up on ensuring that it had an appropriate grasp of theoperational management conditions and steady implementation of asset management plans for each
property. Top REIT also carried out renewal construction and repair work that contribute to enhancing
the competitiveness of properties and maintaining and improving the functionality of properties basedon asset management plans, took steps to keep relevant costs at an appropriate level, and conductedefficient management of resources.
C. Procurement of Funds
Top REIT procures funds by adopting a financial policy that is based on stable financial management. In
the fourteenth fiscal period, ¥9,800 million in long-term loans payable due for repayment on November
30, 2012 was refinanced with ¥7,000 million in long-term loans payable (loan period: 2 years and 10
months, repayment date: September 30, 2015) and ¥2,800 million in short-term loans payable (loanperiod: 4 months, repayment date: March 27, 2013) on the same date.
Of the ¥9,300 million long-term loan payable due for repayment on March 27, 2013, and the ¥2,800
million short-term loan payable, totaling ¥12,100 million, a part of principal (¥2,000 million) was repaid
using cash on hand and ¥10,100 million was refinanced with ¥4,670 million in long-term loans payable(loan period: 5 years, repayment date: March 27, 2018) , ¥2,355 million in long-term loans payable (loanperiod: 5 years, repayment date: March 27, 2018) , and the ¥3,075 million in long-term loans payable(loan period: 2 years and 6 months, repayment date: September 30, 2015) on the same date in order toextend the remaining period of interest-bearing liabilities, and to spread out repayment dates. Moreover,on April 30, 2013, Top REIT newly procured ¥1,230 million through long-term loans payable (loanperiod: 5 years, repayment date: April 30, 2018) in order to fund the acquisition of MEL Building. Top
REIT also repaid ¥67 million of the long-term loans payable as agreed using cash on hand on December
28, 2012.
As a result, at the end of the fourteenth fiscal period, the total amount of interest-bearing liabilities stands
at 96,065 million (¥87,565 million in long-term loans (including the current portion) and ¥8,500 million
in investment corporation bonds), and the ratio of interest-bearing liabilities to total assets is 51.4%.
Moreover, the ratio of long-term interest-bearing liabilities (including the current portion) is 100%, whileinterest-bearing liabilities with fixed interest rates account for 44.1%.
The credit ratings of Top REIT as of April 30, 2013 are as follows:
Credit Rating Agency
Rating [Outlook]
Issuer rating: Baa1 [Negative]
Senior unsecured long-term rating
Moody’s Japan K.K.
(Moody’s)(No. 1 Unsecured Investment Corporation Bonds):
Baa1 [Negative]
Issuer rating: A+ [Stable]
Rating and Investment Information, Inc.
Unsecured investment corporation bond rating(R&I)(No. 1 Unsecured Investment Corporation Bonds): A+
Moreover, Top REIT conducted shelf registration for investment corporation bonds, as indicated below,
in order to secure flexible procurement of long-term funds.
[Overview of Shelf Registration]
Object of Shelf Registration
Investment corporation bonds(excluding short-term corporation bonds)

Amount to be Issued

Scheduled Period of Issue¥100,000 million

From May 20, 2012 to May 19, 2014

D. Business Results and Dividends
As a result of the asset management and operations described above, Top REIT recorded asset
management performance during the fourteenth fiscal period of ¥5,844 million in operating revenue,¥2,447 million in operating income and ¥1,823 million in ordinary income after deducting expenses
concerning borrowings, etc., and net income was ¥1,822 million.
As for dividends, with the aim of having an amount equivalent to profit dividends deducted as expenses
18

based on the application of the special provision on taxation of investment corporations (Article 67-15 of
the Act on Special Measures Concerning Taxation [Act No. 26 of 1957, as amended; hereinafter, the“Special Taxation Measures Act”]), Top REIT decided that the entire amount of unappropriated retained
earnings of the fourteenth fiscal period, excluding fractions of the dividend per investment unit that areless than ¥1, would be paid out. Consequently, Top REIT declared a dividend per investment unit of¥11,759.
3. Balance of Paid-in Capital
There was no change in paid-in capital for the 14th fiscal period. The outline of changes in paid-in capitalfrom the establishment of Top REIT to the end of the current fiscal period is as follows:
Issue date

Remarks

Total number of units
issued and outstanding(units)Increase
Balance

Total paid-in capital(million yen)

Note

Increase
Balance
Incorporation
November 2, 2005
200
200
100
100
Note 1(private)
February 28, 2006
Public offering
145,300
145,500
77,117
77,217Note 2
March 23, 2006
Third party allotment
9,500
155,000
5,042
82,260Note 3Note 1: Top REIT was established with initial capital of ¥500,000 per unit.
Note 2: New investment units were issued at a price of ¥550,000 per unit (issue value of ¥530,750 per unit)
through a public offering in order to raise funds for acquiring new properties.
Note 3: New investment units were issued at a value of ¥530,750 per unit through a third party allocation to raise
funds for acquired properties.

[Market Price of Investment Units]
The market price of the investment units on Tokyo Stock Exchange REIT Market during respective fiscal
periods is as follows:
Fiscal period
As of the end of fiscal
periodHighest price
Lowest price

10th

11th

12th

13th

14th

April, 2011

October, 2011

April, 2012

October, 2012

April, 2013

567,000yen
410,000yen

490,000yen
384,000yen

484,000yen
333,000yen

459,000yen
358,500yen

576,000yen
351,000yen

4. Cash Distribution
The dividend per unit for the current period was 11,759 yen. Top REIT expects to distribute almost all
unappropriated retained earnings at the current period end to be eligible for special tax treatments (Special
Taxation Measures Law Article 67-15) that allows Top REIT to deduct an amount equivalent to
distributions of retained earnings as expenses from taxable income.
Fiscal period
As the end of
fiscal period
Unappropriatedretained earnings
Internal reserves
Total dividends(Dividend per unit)
Of which, dividend ofaccumulated earnings(Per unit)
Of which, repaymentof paid-in capital(Per unit)

Units
thousandyen
thousandyen
thousandyen(yen)
thousandyen(yen)
thousand
yen
(yen)

10th
April,
2011

11th
October,2011

12thApril,
2012

13th
October,2012

14thApril,
2013

2,157,918

1,985,468

1,999,419

2,001,377

1,822,649

8

73

49,98417

42,157,910

1,985,395

1,949,435

2,001,360

1,822,645(13,922)(12,809)(12,577)(12,912)(11,759)

2,157,910

1,985,395

1,949,435

2,001,360

1,822,645(13,922)(12,809)(12,577)(12,912)(11,759)

－

－

－

－

－

－

－

－

－

－

19

5. Management Policy and Future Issues(a)Management Strategy for Existing Properties
Top REIT will continue to follow its basic asset management strategy that centers on sustaining andincreasing revenue over the medium to long term by maintaining and improving tenant satisfaction (the“Tenants First” policy) and keeping operational management costs at an appropriate level. Under thisstrategy, Top REIT will focus on sustaining relationships of trust with tenants, leasing vacant spaces andsuch, as well as striving to maintain stable occupancy rates over the medium to long term.
Continuously positioning the successor tenant solicitation activities at Harumi Island Triton Square
Office Tower Y as a top priority issue, Top REIT will focus on solicitation activities in order to solidify
the prospects of a successor tenant as early as possible by selecting from broad-ranging andhighly-potential candidates while continuing to approach candidates that are currently considering
tenancy.
Furthermore, Top REIT will also work to ensure an appropriate perception of the operational
management conditions for each property while steadily implementing such measures as to sustain andimprove revenues and keep operational management costs at an appropriate level. In addition, Top REIT
will carry out systematic repair work and such to enhance the competitiveness of properties and tomaintain and improve the functionality of properties, in an aim to secure stable revenues over the
medium to long term.
(b)Investment Strategy for New Properties
Top REIT aims to increase its dividends over the medium to long term by realizing external growththrough acquisition of new properties. Top REIT will continue to not only further utilize pipeline
support functions from sponsor companies, but also utilize various established information channels tocollect information on new properties based on detailed analysis of market environment of each asset
classes, while placing emphasis on primarily highly competitive office buildings. By doing so, Top
REIT aims to expand the portfolio size while improving its quality.
Furthermore, Top REIT makes it a management policy to keep the ratio of the investment amount perproperty at less than 20% of the entire portfolio as a target over the medium to long term. For reference,
the acquisition value of the NEC Head Office Building accounts for 22.6% of the total acquisition valueof Top REIT’s properties as of the end of the fourteenth fiscal period. Going forward, Top REIT will
work to reduce the risk of concentration on specific properties by steadily advancing further external
growth.
(c)Financial Strategy
Top REIT will continue to implement diversified and flexible fund procurement operations in
preparation for acquisition of new properties and refinancing of existing loans, etc. While securing
mobility and flexibility in fund procurement, Top REIT will work to reduce the risk involved in fundprocurement by extending borrowing periods and spreading out the repayment dates. At the same time,
Top REIT will manage the risk of interest rate fluctuations by taking into account the balance ofborrowings at floating and fixed interest rates, as it discerns the interest rate trends. Moreover, financial
soundness will be maintained by keeping the leverage at an appropriate level.
(d)Compliance and Risk Management, etc.
In addition to the supervision of the Executive Officer by Supervisory Directors at the Board of
Directors meetings and other occasions, Top REIT will continue its direction and supervision on the
Asset Manager that it can conduct management operations with full care given to market risks,
including rent decreases, and credit risks as well as with a focus on the protection of unitholders’interests in conducting transactions with interested parties and on other compliance issues.
6. Significant Subsequent Events
There are none applicable.
[Reference Information]
Top REIT decided at its Board of Directors meeting held on May 23, 2013 to convene the fifth General
Meeting of Unitholders, scheduled for July 25, 2013.

20

【2】Outline of Top REIT
1. Status of Unitholders’Capital
Fiscal period
As of the end of fiscal period
Number of issuable investment units (units)
Number of units issued and outstanding(units)Unitholders’ capital (million yen)
Number of unitholders

10thApril,
2011
2,000,000

11th
October,
2011
2,000,000

12thApril,
2012
2,000,000

13th
October,
2012
2,000,000

14th
April,
2013
2,000,000

155,000

155,000

155,000

155,000

155,000

82,2607,090

82,2607,031

82,2606,912

82,2607,823

82,2607,872

2. Matters Concerning the Investment Units
Major unitholders as of April 30, 2013 were as follows:
NameJapan Trustee Service Bank (trust account)
Trust and Custody Services Bank (securities investment trust account)
The Master Trust Bank of Japan (trust account)North Pacific Bank, LTD.
Nomura Trust and Banking (investment trust account)
Sumitomo Mitsui Trust Bank, Limited.
Oji Real Estate Co., Ltd.
NIPPON STEEL KOWA REAL ESTATE CO.,LTD.
MetLife Alico Life Insurance K.K GA Company JPY
The Senshu Ikeda Bank, Ltd.
The Asahi Fire & Marine Insurance Co., Ltd.
NOMURA BANK (LUXEMBOURG) S.A.
The Minami Nippon Bank, Ltd.
The Iyo Bank, Ltd.
The Gibraltar Life insurance Co., Ltd (general accounts J-REIT
account)
Total
Note: The share of total is rounded down to the second decimal place.

Number of units held
(units)38,988
8,798
6,782
6,139
4,689
3,176
3,162
3,162
3,066
3,040
2,927
2,691
1,550
1,500

Share of total(%) (Note)
25.15
5.67
4.37
3.96
3.02
2.04
2.04
2.04
1.97
1.96
1.88
1.73
1.00
0.96

1,465

0.94

91,135

58.79

3. Officer and Auditor
A: Name of directors and auditor as of April 30, 2013 were as follows:
Post

Name

Major additional post

Jumpei Norimatsu(Note 1)
Yasuyuki Kuribayashi
Supervisory Director(Note 1)
Executive Officer

Total amount of fee paid
during the current period(thousand yen)

－

2,700

Partner Attorney,
1,800
City-Yuwa Partners (Note 2)
Managing Partner, Tsuneyama
Certified Public Accountants Office
Managing Partner, Tsuneyama Sogo
Kunio Tsuneyama
Supervisory Director
Accountants Office
1,800(Note 1)Non Executive Director in Kuroda
Electric Co., Ltd.
(Note 2)
Accounting Auditor KPMG AZSA LLC
10,000－Note 1: There are no investment units of Top REIT held by the Executive Officer or Supervisory Directors in theirown name or others' names.
Note 2: Although Supervisory Directors may have additional posts in entities other than those listed above, there
is no conflict of interest between those companies including those listed above and Top REIT.
Note 3: There was no resignation or dismissal of the Officer and Auditor during the current period.

B: Policy on determination of dismissal and denial of reappointment of accounting auditor
The Board of Directors shall decide after taking various factors into consideration.

21

4. Asset Manager, Asset Custodian and Administrative Agents
Asset manager, etc. as of April 30, 2013 were as follows:Business
Asset manager
Assets custodian services
Administrative agent services(running of the organization, accounting matters, etc.)
Administrative agent services(unitholders’ register, special accounts)
Administrative agent services(investment corporation bonds)

Company name
Top REIT Asset Management Co., Ltd.
Sumitomo Mitsui Trust Bank, Limited.
Sumitomo Mitsui Trust Bank, Limited.
Sumitomo Mitsui Trust Bank, Limited.
Sumitomo Mitsui Trust Bank, Limited.

【3】 Status of Investment Assets
1. Composition of Assets

Type ofassetsAsset class

Officebuildings

Area

Central Tokyo
Subtotal
Central Tokyo
Tokyo
OfficeMetropolitan
buildings
Area
Subtotal
Tokyo
Metropolitan
Area
Retailfacilities
Other
Real estate
Major Cities
in trust
Subtotal
Central Tokyo
Tokyo
Residential
Metropolitan
Area
Subtotal
Central Tokyo
OthersSubtotal
Subtotal of real estate and real estate in trust
Cash, deposits and other assets
Real estate

13th
As of October 31, 2012
As a
Total amountpercentage of
owned
total assets(million yen)(%)
(Note 1)
(Note 2)
5,870
3.1
5,870
3.1
126,718
67.3

14th
As of April 30, 2013
As a
Total amountpercentage of
owned
total assets(million yen)(%)
(Note 1)
(Note 2)
5,857
3.1
5,857
3.1
126,390
67.6

1,678

0.9

1,647

0.9

128,39768.2

128,037

68.5

23,23812.3

23,075

12.3

－

－

1,234

0.7

23,238
2,459

12.3
1.3

24,309
2,431

13.0
1.3

17,795

9.5

17,6549.4

20,254
10.8
20,086
10.7
2,684
1.4
2,712
1.5
2,684
1.4
2,712
1.5
180,44695.8
181,003
96.8
7,994
4.2
6,000
3.2
188,440100.0
187,003
100.0
Total assets (Note 3)(180,446)(95.8)(181,003)(96.8)
Note 1: Total amount owned is based on the amounts appropriated on the Balance Sheet at the end of each period.
(Real estate and real estate in trust represent the book values after deducting depreciation). Total Amountfigures were rounded down to the nearest million yen.
Note 2: (Total amount owned) As a percentage of total assets is rounded to first decimal place.
Note 3: Figures in parenthesis of total assets represent the portions of actually owned properties in the object
assets.

22

< Geographical Classification >Area

RegionSupplementary note

Central Tokyo

Chiyoda, Chuo, Minato, Shibuya, Shinjuku
and Shinagawa Wards

―

Tokyo
Metropolitan
Area

Tokyo (excluding central Tokyo),
Kanagawa, Saitama and Chiba Prefectures―

KansaiRegional economic zone centering
on Osaka

Osaka, Kyoto, Hyogo, Shiga, Nara andWakayama Prefectures

ChukyoRegional economic zone centeringon Nagoya

Aichi, Gifu and Mie Prefectures

Major cities
Across thecountry

Cities designated by government ordinanceand other major cities (excluding cities
belonging to the above classifications)23―

2. Major Properties Owned
The principal properties (top ten properties by book value) that Top REIT owns as of April 30, 2013 wereas follows:
Property nameBook value

(m2)

(m2)

(%)

42,89572,238.03

72,238.03

100.0

23.5

Office30,54023,170.40

9,682.86

41.8

23.5

Office19,576

10,914.20

10,914.20

100.0

6.6

Office12,722

8,025.65

8,025.65

100.0

7.3

Office11,306

61,763.28

61,763.28

100.0

7.0

Retailproperty

10,177

11,357.44

11,055.83

97.3

4.1 Residential

9,779

7,301.15

7,213.41

98.8

4.1

Office7,866

51,098.42

51,098.42

100.0

4.0

Retailproperty(Real estate)

5,857

3,060.43

1,908.99

62.4

1.5

Office(Trustbeneficiaryinterest)

5,804

6,032.24

6,032.24

100.0

3.4

Office156,527

254,961.24

239,932.91

94.1

85.0

(million yen)
NEC Head Office
Building
Harumi Island
Triton Square
Office Tower Y
Harumi Island
Triton Square
Office Tower Z
Kanda Nishiki-cho
3-chome Building
Sagamihara
Shopping Center
Fukasawa House
Towers H&I
Akasaka Oji
Building
Ito-Yokado
Higashi-NarashinoStore
Shiba-Koen
Building
Shinkawa
Chuo Building
Total

Leasable floor Leased floor Occupancy Portion of
space
space
rate
rental(Note 1)
(Note 2)
(Note 3)revenue Primary use(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(%)

Note 1: Leasable floor space is total leasable space for each asset as of the end of the current period. Furthermore, in the case ofco-ownership (including quasi-co-ownership), the stated figure is given by multiplying the leasable floor space of thewhole building by the ratio of co-ownership, and rounded to the second decimal place.
Note 2: Leased floor space is floor space based on lease agreements effective as of the end of the current fiscal period.
Furthermore, in the case of co-ownership (including quasi-co-ownership), the stated figure is given by multiplying theleased floor space of the whole building by the ratio of co-ownership, and rounded to the second decimal place. In thecase of contracting the master-lease agreements as pass-through type, the floor space subleased to end-tenants is
calculated as the leased area.
Note 3: Occupancy rate is the figure given by dividing leased floor space as of the end of the current fiscal period by leasable
floor space, and rounded to the first decimal place.

24

Asset class

3. Details of Portfolio Properties① Details of Properties
A. The details of properties owned by Top REIT as of April 30, 2013 were as follows

Area

Property name(Note)

Office building

Kanda Park Plaza

Retail property

Type of title(million yen)

NEC Head Office
Building
Harumi Island
Triton Square
Office Tower Y
Akasaka Oji
Building

Residential

Address

Central Tokyo

Shiba-Koen
Building
Harumi Island
Triton Square
Office Tower Z
Kanda Nishiki-cho
3-chome Building
Shinkawa Chuo
Building

Tokyo
Metropolitan
Faret East Building
Area
Subtotal (9 Properties)
Sagamihara
Shopping
CenterTokyo
Ito-Yokado
Metropolitan
Higashi-Narashino
Area
Store
Musashiurawa
Shopping Square
Other
MEL Building
Major Cities
Subtotal (4 Properties)
Top ResidenceCentral Tokyo Nihonbashi
Kayabacho
Fukasawa House
Towers H&I
Ecology Toyosu
Tokyo
Procentury
Metropolitan
Impress
Area
Musashi-Koganei
Top Residence Yoga

Central TokyoOAK PLAZABook value at
end of 14th
period(million yen)

5-7-1 Shiba, Minato Ward,Tokyo

Trust beneficiaryinterest

49,50042,8951-8-11 Harumi, Chuo Ward,Tokyo

Trust beneficiaryinterest

30,80030,5408-1-22 Akasaka,
Minato Ward, Tokyo
2-2-2 Kajicho,
Chiyoda Ward, Tokyo
3-5-5 Shiba, Minato Ward,Tokyo

Trust beneficiaryinterest
Trust beneficiaryinterest

8,060

9,779

4,910

5,070

Real estate

3,470

5,857

1-8-12 Harumi, Chuo Ward,Tokyo

Trust beneficiaryinterest

12,60019,576

3-11-1 Kanda Nishiki-cho,
Chiyoda Ward, Tokyo
1-17-24, Shinkawa,
Chuo Ward, Tokyo

Trust beneficiaryinterest
Trust beneficiaryinterest

14,10012,722

5,780

5,804

2-34-7 Akebonocho,
Tachikawa City, Tokyo

Trust beneficiaryinterest

2,410

1,647

131,630

133,895

3-13-33 Kobuchi, Minami
Ward, Sagamihara City,
Kanagawa

Trust beneficiaryinterest

10,50011,306

7-3-1 Higashi Narashino,
Narashino City, Chiba

Trust beneficiaryinterest

5,620

7,866

7-3-1 Bessho, Minami Ward,
Saitama City, Saitama
2-7-28 Chuo, Aoba Ward,
Sendai City, Miyagi

Trust beneficiaryinterest
Trust beneficiaryinterest

3,880

3,902

1,260

1,234

21,26024,309

2,580

2,431

7,030

10,177

4,980

4,984

1,260

1,272

1,170

1,220

17,02020,086

2,450

2,712

2,450

2,712

3-4-1 Nihonbashi
Kayabacho, Chuo Ward,Tokyo
2-1-2 Fukasawa,
Setagaya Ward, Tokyo
4-8-8 Toyosu, Koto Ward,Tokyo
4-14-18 Nakamachi,
Koganei City, Tokyo
1-14-12 Tamagawadai,
Setagaya Ward, Tokyo

Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

Subtotal (5 Properties)
Other

Appraisalvalue at end of
14th period

2-10-6 Kanda Awajicho,
Chiyoda Ward, Tokyo

Subtotal (1 Property)

Trust beneficiaryinterest

Total (19 Properties)
172,360
181,003
Note: For “Appraisal value at end of period,” Top REIT indicates the assessed value based on the appraisal by real estate appraisers
following the asset evaluation method and standards stipulated in Top REIT’s Articles of Incorporation and rules of The
Investment Trusts Association, Japan (based on real estate appraisal reports prepared by Tanizawa Sogo Appraisal Co, Ltd;
Japan Real Estate Institute and Daiwa Real Estate Appraisal Co, Ltd) as of April 30, 2013 as the points of evaluation.

25

Area

Name ofproperty

Central Tokyo

NEC Head Office
Building
Harumi Island
Triton Square
Office Tower Y
Akasaka Oji
Building
Kanda Park Plaza
Shiba-Koen
Building
Harumi Island
Triton Square
Office Tower Z
Kanda Nishiki-cho
3-chome Building
Shinkawa Chuo
Building

Occupancy
rate(end ofperiod)Occupancy Rent revenue Ratio of rentalrate- real estaterevenue to(end of(for period) total rental
period)revenues(million yen)(%)
(Note 2)(%)(%)

Rent revenue Ratio of rental Number of- real estaterevenue totenants(for period) total rental(end ofrevenues
period)(million yen)(case)(Note 2)(%)
(Note1)
1,370

24.3

1

100.0

1,370

23.5

7

100.0

1,217

21.6

3

41.8

1,372

23.5

6

98.8

135

2.4

6

98.8

239

4.1

10

100.0

176

3.1

10

100.0

173

3.0

2

77.5

98

1.8

2

62.4

87

1.5

1

100.0

7.3

1

100.0

6.6

1

100.0

7.6

1

100.0

7.3

1

100.0

204

3.6

1

100.0

199

3.4

1

89.6

151

2.7

1

89.6

139

2.4

30

99.0

4,191

74.4

26

89.1

4,400

75.3

2

100.0

407

7.2

2

100.0

407

7.0

1

100.0

236

4.2

1

100.0

236

4.0

3

100.0

129

2.3

3

100.0

129

2.2

―

―

―

―

1

100.0

0

0.0

Subtotal (4 properties)

6

100.0

772

13.7

7

100.0

773

13.2

Top Residence
Nihonbashi
Kayabacho

1

96.9

90

1.6

1

95.2

88

1.5

Fukasawa House
Towers H&I

1

97.8

240

4.2

1

97.3

238

4.1

Ecology Toyosu
Procentury

1

95.7

164

2.9

1

92.5

167

2.9

1

93.4

44

0.8

1

90.5

44

0.8

1

92.7

37

0.7

1

94.7

37

0.6

5

96.4

576

10.2

5

95.0

576

9.9

OAK PLAZA

1

100.0

94

1.7

1

100.0

94

1.6

Subtotal (1 property)
Total (19 properties)

1
42

100.0
99.2

94
5,636

1.7
100.0

1
39

100.0
94.5

94
5,844

1.6
100.0

Tokyo Metropolitan Area

CentralTokyo

Retail property
Other
Tokyo
Major
Metropolitan Area
CitiesResidential

Fourteenth Fiscal Period
From November 1, 2012
to April 30, 2013

100.0

Faret East
Building

Subtotal (9 properties)
Sagamihara
Shopping Center
Ito-Yokado
Higashi-NarashinoStore
Musashiurawa
Shopping Square
MEL
Building

CentralTokyo

Impress
Musashi-Koganei
Top Residence
Yoga
Subtotal (5 properties)

Other

Number oftenants(end ofperiod)(case)(Note1)

Thirteenth Fiscal Period
From May 1, 2012
to October 31, 2012

1

Tokyo
Metropolitan
Area

Office building

Asset class

B. Operating results for each fiscal period of each property owned were as follows:

Note1: Number of tenants indicates total number of tenants of each property as of the end of period. In the case a master leaseagreement is concluded, it is counted as 1 tenant. In the case 1 tenant rents multiple units, it is counted as 1 tenant if the units
are in the same property and as multiple tenants if the units are in multiple properties.
Note 2: Rent revenue for Harumi Island Triton Square Office Tower Z and Kanda Nishiki-cho 3-chome is not disclosed due to being
unable to obtain the consent of the tenants.

26

② Details of Investment Securities
There are none applicable.
4. Contracted Amount and Market Price of Specified Transactions
The contracted amount and market price of the specified transactions of Top REIT as of April 30, 2013
were as follows:
Contract amount (Note 1) (Note 2)
Segment

Type of transaction

Longer than a year

Transaction other than Interest-rate swap
market transaction(receiving floating-rate, Paying fixed-rate)

27,20027,200(Million yen)
Market price(Note 1)
(Note 3)
(214)

Total
27,20027,200(214)
Note 1: The above figures are rounded down to the nearest million yen.
Note 2: Contract amounts of interest-rate swap transactions represent figures based on the estimated principal.
Note 3: Market price is evaluated at the price calculated by the counterparty of the concerned transaction contract based on theprevailing market rate.

5. Status of Other Assets
All real estate and trust beneficiary interests in real estate are listed in the table under the “3-① Detailsof Portfolio Properties. ”There were no significant specified assets that are main investment targets of
Top REIT other than those listed above as of April 30, 2013.
6. Status of Assets by Country and Region
There are none applicable.

27

【4】Capital Expenditures for Properties Owned(1) Schedule of Capital Expenditures
The table below lists the estimated amounts of significant capital expenditures for repair andmaintenance work of properties held by Top REIT, planned as of April 30, 2013. The estimatedconstruction costs shown in the table below include those charged to expenses in accounting.
Estimated construction cost
(million yen)
Payment Total of
Total
for theadvanceperiodpayment

Name of property

Location

PurposeScheduled term
for construction
or maintenance

NEC Head
Office Building
Harumi Island
Triton Square
Office Tower Y

Minato Ward,Tokyo

Renewal of automatic
fire alarm system

May 2013 to
September 2013

12

―

―

Chuo Ward,Tokyo

Renewal of common
spacesApril 2013 to
May 2013

51――

Akasaka Oji
Building

Minato Ward,Tokyo

October 2013 to
October 2013

14

―

―

June 2013 toAugust 2013

20

―

―

Shinkawa Chuo Chuo Ward,
Building
Tokyo

Renewal of ventilationequipment and air
blowers
Renewal of common
restrooms(2) Capital Expenditures Made During the Period
The following table is an overview of construction work conducted during the fiscal period that fallunder the category of capital expenditures for properties held. Capital expenditures during the fiscal
period amounted to ¥443 million and combined with ¥522 million in repairs and maintenance costs thatfall under expenses for the fiscal period, a total of ¥966 million of construction work was implemented.
Name of property

NEC Head
Office Building

Shinkawa Chuo Building
OAK PLAZA
OthersLocation

Minato Ward,Tokyo

Chuo Ward,Tokyo
Chiyoda Ward,Tokyo

PurposeScheduled term forconstruction or maintenance

Renewal of external
May 2012 to November 2012
wall and ceiling
Renewal of gondola
May 2012 to January 2013
Renewal of
May 2012 to March 2013
waterproof equipment
Renewal of lighting
May 2012 to January 2013
SystemRenewal of
automatic fireMay 2012 to March 2013
alarm system
Renewal of coolingMay 2012 to March 2013
tower
Renewal of
May 2012 to March 2013
Refrigerator
Renewal of
May 2012 to January 2013
heat source pump
Renewal of air
May 2012 to January 2013
Condition facility
Construction worksof air condition
May 2012 to March 2013
pipe units
Renewal of central
May 2012 to March 2013
monitor system
Renewal ofJanuary 2013 to March 2013
common restrooms
Renewal of external
May 2012 to November 2012
wall and ceiling
Renewal of function November 2012 to April 2013
Total

28

Capitalexpenditures(million yen)
26
23
12
10
50
23
45
10
42
15
44
16
35
84
443

(3) Funds Reserved for the Long-term Repair and Maintenance Plan
(Million yen)

Fiscal period

10th
From
November 1,
2010
to April 30,
2011

11th
From
May 1,
2011
to October 31,
2011

12th
From
November 1,
2011
to April 30,
2012

13th
From
May 1,
2012
to October 31,
2012

14th
From
November 1,
2012
to April 30,
2013

530

330

443

347

410

197

197

197

197

197

396

84

292

133

232

330

443

347

410

375

Balance of reserved funds at
beginning of current period
Amount reserved during thecurrent period
Amount used from reserved
funds during the current
periodBalance carried forward to
the next period【5】Condition of Expenses and Liabilities(1) Details of Expenses Related to Management(Million yen)

Fiscal Period
Item

13th
From May 1, 2012
to October 31, 2012(a) Asset management fees (Note)(b) Asset custodian fees and14th
From November 1, 2012
to April 30, 2013
430

416

72
72
administrative service fees(c) Directors’ compensation
66(d) Audit fees1010(e) Other expenses
36
42
Total
554
548
Note: In addition to the amounts described above, asset management fees consisted of ¥6 million in 14th fiscal
period in association with the acquisition of new properties recorded as book value of the respective
properties.

29

(2) Status of Borrowings
Status of borrowings from respective financial institutions as of April 30, 2013 is as follows.
Category

Current Portion of Long-Term Loans Payable

Short-Term Loan
PayableLenderDateborrowed

Mizuho Corporate Bank, Ltd.
NovemberTerm Loan Mitsubishi UFJ Trust and30, 2012
No. 19-② Banking Corporation

Subtotal
Sumitomo Mitsui Trust
Bank, Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
March 27,
Term Loan The Bank of
2008
Tokyo-Mitsubishi UFJ, Ltd.
No. 7
Mitsubishi UFJ Trust andBanking Corporation
Development Bank of Japan,
Inc.
Subtotal
Sumitomo Mitsui Trust
Bank, Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
January 13,
The Bank of2010
Term Loan Tokyo-Mitsubishi UFJ, Ltd.
Mitsubishi UFJ Trust andNo. 11Banking Corporation
Resona Bank, Limited
Development Bank of Japan, January 13,
Inc.
2010
Subtotal
Total
Sumitomo Mitsui Trust
Bank, Limited.
Development Bank of Japan,
Term Loan Inc.
No. 5
The Dai-ichi Life InsuranceCo., Ltd.
SubtotalJune 29,
2007

Long Term Loans Payable

Term Loan Development Bank of Japan, January 13,
No. 11 Inc.
2010
Sumitomo Mitsui Trust
Bank,, Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Term Loan
March 3,
Corporation
No. 142011
The Bank ofTokyo-Mitsubishi UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Trust
Bank, Limited
Term Loan
March 31,
The Bank of Fukuoka, Ltd.
No. 152011
The Hiroshima Bank, Ltd.
The Yamaguchi Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Term Loan
November
Corporation
No. 1630, 2011
The Bank ofTokyo-Mitsubishi UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation

Balance at the
beginning of
the current
period(million yen)

Balance atthe end of
the current
period(millionyen)――(Note 2)

―

―

6,300

―

1.48

3,000

―

1.53

9,300

―

9,800

―

135

135

9,935
19,235

135
135

2,000

2,000

2.27

1,000

1,000

2.40

1,000

1,000

2.40

4,000

4,000

2,227

2,160

2.42

November30, 2016

16,70016,7001.39

BulletUnsecured andFebruary 29, repayment on(Note 3)
without
2016
repayment
guarantee
date

0.80

BulletUnsecured andFebruary 29, repayment on(Note 6)
without
2016
repayment
guarantee
date

0.55

November30, 2016

6,700

19,04030

6,700

19,040

Averageinterest
Repayment Repayment Use of
rate
date
method proceeds(%)(Note 1)

Remarks

March 27,2013

BulletUnsecured andrepayment on(Note 3)
without
repayment
guarantee
date

March 27,2013

BulletUnsecured andrepayment on(Note 4)
without
repayment
guarantee
date

1.23

November30, 2012

BulletUnsecured andrepayment on(Note 4)
without
repayment
guarantee
date

2.42

November30, 2016

0.58

June 30,
2014(Note 5)(Note 4)

Unsecured andwithout
guarantee

BulletUnsecured andrepayment on(Note 6)
without
repayment
guarantee
date(Note 5)(Note 4)

Unsecured andwithout
guarantee

BulletUnsecured andrepayment on(Note 3)
without
repayment
guarantee
dateTerm Loan
No. 17

Term Loan
No. 18Term Loan
No. 19-①

Term Loan
No. 20Sumitomo Mitsui Trust
Bank, Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
March
Corporation30, 2012
The Bank ofTokyo-Mitsubishi UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Trust
Bank, Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
June 29,
Corporation
2012
The Bank ofTokyo-Mitsubishi UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Trust
Bank, Limited.
Sumitomo Mitsui Banking
November
Corporation30, 2012
The Bank ofTokyo-Mitsubishi UFJ, Ltd.
Resona Bank, Limited
Sumitomo Mitsui Trust
Bank, Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
The Bank of
May 27,
Tokyo-Mitsubishi UFJ, Ltd.
2013
Development Bank of Japan,Inc.
Mizuho Corporate Bank, Ltd.
Mitsubishi UFJ Trust andBanking Corporation

Sumitomo Mitsui Trust
Term Loan
Bank, Limited.
No. 21
Resona Bank, Limited

April 30,2013

Subtotal
Total

Note1:

Note2:
Note3:
Note4:
Note5:
Note6:
Note7:

3,000

3,000

0.65

9,000

9,000

0.65

8,500

8,500

0.79

―

7,000

0.65

―

4,670

BulletUnsecured andOctober 31, repayment on(Note 4)
without
2016
repayment
guarantee
date

0.76

June 30,
2017

BulletUnsecured andrepayment on(Note 3)
without
repayment
guarantee
date

September
30. 2015

BulletUnsecured andrepayment on(Note 3)
without
repayment
guarantee
date

March 27,
2018

―

2,355

1.08

―

3,075

0.64

September,
30, 2015

0.75

April 30,
2018

―

1,230

69,16788,40287,43087,565

BulletUnsecured andrepayment on(Note7)
without
repayment
guarantee
date

BulletUnsecured andrepayment on(Note 4)
without
repayment
guarantee
date

The average interest rate is the interest rate of borrowings for the respective loan contracts (weighted by the balance during
the period) and rounded to the second decimal place. Furthermore, the average interest rate related to the borrowing hedgedby an interest rate swap transaction for the purpose of reducing interest rate fluctuation risk is weighted by considering theeffect of the relevant interest rate swap.
Fully repaid on March 27, 2013.
The use of borrowings is for repayment of long-term loans payable.
The use of borrowings is for acquisition of trust beneficiary interest in real estate.
Repayment of ¥67.5 million will be made at the end of June and December each year starting on June 30, 2010, with theremaining payment of ¥1,822.5 million to be repaid on November 30, 2016, the final repayment date.
The use of borrowings is for repayment of short-term loans payable.
The use of borrowings is for repayment of short-term and long-term loans payable.

(3) Status of Investment Corporation Bonds
Investment corporation bonds issued and outstanding as of April 30, 2013 are as follows.
Name of Bonds
No.1 Unsecured
Investment
Corporation
Bonds (Note)
Total

Issue
Date

Balance as of
the beginning of thecurrent period(million yen)

Balance as ofthe end of thecurrent period(million yen)Interest
Rate(%)

Maturity
Date

Redemption
methodUse ofproceeds

RemarkJune 4,
2010

8,500

8,500

1.00

June 4,2015

Bulletpayment

Repaymentof borrowing

Unsecured
and without
guarantee

8,500

8,500

Note: This bond is equipped with special pari passu conditions among the specified investment corporation bonds.

(4) Status of Short-Term Investment Corporation Bonds
There are none applicable.

31

【6】Status of Acquisitions and Dispositions During the Period(1) Acquisitions and Dispositions of Real Estate, etc. and Asset Backed Securities
Type ofAssetsName of Property

Acquisition
Acquisition
Acquisition
Price
Date
(million yen)
(Note)

Disposition
Disposition
Date

Capital Gain
Disposition
Book Valueand LossPrice(million yen)(million yen)(million yen)

Trust
Beneficiary
April 30,
MEL Building
1,210
―
―
―
―
2013
Interest in
Real Estate
Note 1: Acquisition Price is the amount (acquisition price indicated in the sales agreement) excluding expenses (such as realestate transaction brokerage fees, real estate tax, etc.) required for transaction of the relevant property.

(2) Acquisitions and Dispositions of Others Assets
Other major assets besides real estate and asset backed securities stated above consist mostly of bankdeposits or bank deposits within assets held in trust.
(3) Research on Prices of Specified Assets
Transactions during the current period that require research on prices of specified assets stipulated by
Article 201 of the Investment Trusts and Investment Corporations Law are as follows.
① Real estate, etc
Acquisition
or
Disposition

Name of Properties

Transaction Date

AcquisitionPrice(million)(Note 1)

Research on
Price ofSpecified
Assets(million)(Note 2)

Appraisal
Institution

Appraised
Date

Daiwa Real
April 1,Estate Appraisal
2013
Co, Ltd.
Note 1: Acquisition Price is the amount (acquisition price indicated in the sales agreement) excluding expenses (such as realestate transaction brokerage fees, real estate tax, etc.) required for transaction of the relevant property.
Note 2: The real estate appraisal is conducted by applying “Real Estate Appraisal Standard Section 3: appraisals concerning
prices of real estate subject to securitization.”
Acquisition

MEL Building

April 30,
2013

1,210

1,260

② Others
There are none applicable(4) Transaction with Interested Parties, etc. and Major Unitholders① Status of Transaction
There are none applicable.
② Amounts of Fees Paid, etc.
Fees paid to interested parties, etc. and major unitholders during the current period are as follows.
Item

Total amount offees paid (A)(thousand yen)

Property management fees

400,198

Brokerage fees
Trust compensation
Asset custodian fees
Administrative service fees

10,00017,276
8,443
64,413

Other fees paid

14,165

Borrowing related expenses
Investment corporation bondrelated expenses
Other non-operating expenses
Other expenses related torent business

136,221Transactions with interested parties, etc.
and major unitholders
Amount ofPaid topayment (B)(thousand yen)
Oji Real Estate Co., Ltd.
23,759Sumitomo Mitsui Trust Bank, Limited.
1,250
Sumitomo Mitsui Trust Bank, Limited.
10,000Sumitomo Mitsui Trust Bank, Limited.
15,125
Sumitomo Mitsui Trust Bank, Limited.
8,443
Sumitomo Mitsui Trust Bank, Limited.
64,413
Sumitomo Mitsui Trust Bank, Limited.
1,429
Oji Real Estate Co., Ltd.
6
Sumitomo Mitsui Trust Bank, Limited.
56,662

Ratio against
total amount
B/A
(%)
5.9
0.3
100.0
87.5
100.0
100.0
10.1
0.0
41.6

5,574

Sumitomo Mitsui Trust Bank, Limited.

623

11.2

5,314

Sumitomo Mitsui Trust Bank, Limited.

342

6.5

5,288

Oji Real Estate Co., Ltd.

488

9.2

32

Note 1:

Note 2:

Interested parties, etc. and major unitholders means interested parties, etc. of the asset manager which concluded
asset management entrustment contract with Top REIT as prescribed in Article 123 of the Enforcement Order of
the Investment Trust and Investment Corporations Law and major unitholders of the asset manager as defined in
Article 29-4, Paragraph 2 of the Financial Instruments and Exchange Law (Law No. 25, 1948. including theamendments thereafter). However, the table above also includes transactions with interested parties as provided in
the internal rules of the asset manager (including special purpose companies, etc. to which interested parties, etc.
have been entrusted with asset management). Please note that the parties to which payments were made during thecurrent period were Sumitomo Mitsui Trust Bank, Limited. and Oji Real Estate Co., Ltd.
In addition to the fees paid described above, the amounts paid for repair and maintenance work placed withinterested parties, etc. during the current period are Oji Real Estate Co., Ltd. of ¥12,772 thousand. Furthermore,
the concerned payments include construction management fees.

(5) Status of Transactions with the Asset Manager Regarding Additional Work Conducted
Top REIT Asset Management Co., Ltd. the asset management company of Top REIT, does notconcurrently conduct any type 1 financial instruments transaction business, type 2 financial instruments
transaction business, land and building transaction business, or real estate syndication business, and has
no such transactions with Top REIT.

【7】Overview of Accounting(1) Assets, Liabilities, Principal and Profit / Loss
Please refer to accompanying Balance Sheets, Statements of Income and Retained Earnings,
Statements of Unitholders’ Equity, Notes to Financial Statements and Statements of Cash Dividends.
(2) Change in Depreciation Method
There are none applicable.
(3) Change in Valuation Methods of Real Estate, etc.
There are none applicable.
(4) Status of Investment Trust Beneficiary Certificates of Top REIT, etc.
There are none applicable.

【8】Others(1) Notice① Hold of the Fifth General Meeting of Unitholders
The Fifth General Meeting of Unitholders of Top REIT is scheduled to be held on July 25, 2013.
② Board of Directors
Executions or modifications of significant agreements approved by the Board of Directors of Top
REIT during the fiscal period were as follows.
Approval date

Approval agenda

June 13, 2013

Determination of agendas andother matters to be submitted forapproval at the Fifth General
Meeting of Unitholders

Description
The Board of Directors determined the agendas andother matters to be submitted for approval at the Fifth
General Meeting of Unitholders to be held on July 25,
2013, as follows.
First Item :Partial amendments to the Articles of Incorporation
Second Item :Appointment of 1 Executive Officer
Third Item :Appointment of 2 substitute Executive Officers
Fourth Item :Appointment of 2 Supervisory Directors(2) Others
Unless otherwise stated, fractions less than the specified unit are rounded down to the nearest
specified unit for monetary amounts and rounded to the nearest specified unit for percentage figures.

33

II. Balance Sheets
Thirteenth Fiscal Period(as of October 31, 2012)
AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Prepaid expenses
Deferred tax assets
Other
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
Structures
Accumulated depreciation
Structures, net
Machinery and equipment
Accumulated depreciation
Machinery and equipment, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Buildings in trust
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Total property, plant and equipment
Intangible assets
Other intangible assets in trust
Other
Total intangible assets
Investments and other assets
Lease and guarantee deposits
Long-term prepaid expenses
Other
Total investments and other assets
Total noncurrent assets
Deferred assets
Investment corporation bond issuance costs
Total deferred assets
Total assets

34(Unit: thousand yen)
Fourteenth Fiscal Period(as of April 30, 2013)

2,306,624
4,538,595
35,841
261,404
16
1,830
7,144,313

520,404
4,180,585
27,442
317,24916
1,830
5,047,529

1,148,529(177,991)
970,537
4,760(3,012)
1,748
17,235(10,398)
6,837
4,058
(1,028)3,029
4,888,525
61,987,617(12,813,533)
49,174,083
697,367(259,630)
437,737
237,480(105,241)132,238
246,048(111,964)
134,083
124,695,656
180,444,479

1,150,996(194,278)
956,718
5,559(3,153)
2,406
17,235(10,927)
6,308
5,013
(1,341)
3,671
4,888,525
62,648,114(13,869,346)
48,778,767
697,808(280,312)
417,496
255,258(118,488)
136,770
250,945(126,500)
124,444
125,686,918
181,002,027

1,850
127
1,977

1,603
106
1,709

10,000613,286
197,185
820,471
181,266,928

10,000706,676
211,855
928,531
181,932,269

29,39629,396
188,440,638

23,88423,884
187,003,684

Thirteenth Fiscal Period(as of October 31, 2012)(Unit: thousand yen)
Fourteenth Fiscal Period(as of April 30, 2013)

Liabilities
Current liabilities
Operating accounts payable
Current portion of long-term loans payable
Accounts payable – otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Other
Total current liabilities
Noncurrent liabilities
Investment corporation bondLong-term loans payable
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust
Deferred tax liabilities
Long-term advances received
Derivatives liabilities
Total noncurrent liabilities

80,127

259,047

19,235,000
252,992
174,072688
102,725
945,950
2,785
20,794,342

135,000
247,216
130,623702
20,742
726,380
4,693
1,524,405

8,500,000
69,167,500
125,901
5,512,599
25,2438,500,000
87,430,000
101,016
5,286,521
26,141
166
7,901

－

10,525
83,341,769

101,351,746

104,136,112

102,876,152

Unitholders’ capital
Surplus
Voluntary retained earnings
Reserve for reduction entry
Total Voluntary retained earnings

82,260,100

82,260,100

49,95849,95849,95849,958Unappropriated retained earnings (undisposed loss)
Total surplus
Total unitholders’ equity
Valuation and translation adjustments
Deferred gains or losses on hedges
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

2,001,377
2,051,336
84,311,436

1,822,649
1,872,608
84,132,708(6,909)(5,177)(6,909)84,304,526
188,440,638(5,177)
84,127,531
187,003,684

Total liabilities
Net Assets
Unitholders’ equity35III. Statements of Income
Thirteenth Fiscal Period(May 1, 2012 –October 31, 2012)(Unit: thousand yen)
Fourteenth Fiscal Period(November 1, 2012 –April 30, 2013)

Operating revenue
5,605,257

Rent revenue – real estate

5,370,000

Other lease business revenue

30,966474,649

Total operating revenue

5,636,223

5,844,649

2,384,258

2,848,597

430,000

416,586

Operating expenses
Expenses related to rent business
Asset management fee
Asset custody fee

8,464

8,443

Administrative service fees

63,97964,413

Directors’ compensations

6,300

6,300

Audit fee

10,00010,00036,19542,7792,939,198

3,397,120

2,697,025

2,447,529

1,448

1,346

Reversal of dividends payable

606

1,093

Insurance income

774

234

Other operating expenses
Total operating expenses
Operating income
Non-operating income
Interest income

198

798

3,027

3,472

Interest expenses

503,691438,278

Interest expense on investment corporation bonds

42,82742,034

Amortization of investment corporation bond issuance costs

5,511

5,511

141,551

136,221

Other
Total non-operating income
Non-operating expenses

Borrowing related expenses

4,171

5,377

697,753

627,423

Ordinary income

2,002,299

1,823,578

Income before income taxes

2,002,299

1,823,578

Income taxes – current

949

945

Income taxes – deferred

(0)

0

Other
Total non-operating expenses

Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings (undisposed loss)

36

948

946

2,001,351

1,822,632

26

17

2,001,377

1,822,649

IV. Statements of Changes in Net Assets (Unitholders’ Equity)(Unit: thousand yen)
Fourteenth Fiscal Period(November 1, 2012 –April 30, 2013)

Thirteenth Fiscal Period(May 1, 2012 –October 31, 2012)
Unitholders’ equity
Unitholders’ capital
Balance at the beginning of the period
Changes of items during the period
Total changes of items during the period
Balance at the end of current period
Surplus
Voluntary retained earnings
Reserve for reduction entry
Balance at the beginning of the period
Changes of items during the period
Provision of reserve for reduction entry
Total changes of items during the period
Balance at the end of current period
Total Voluntary retained earnings
Balance at the beginning of the period
Changes of items during the period
Provision of reserve for reduction entry
Total changes of items during the period
Balance at the end of current period
Unappropriated retained earnings (undisposed loss)
Balance at the beginning of the period
Changes of items during the period
Provision of reserve for reduction entry
Dividends from surplus
Net income
Total changes of items during the period
Balance at the end of current period
Total surplus
Balance at the beginning of the period
Changes of items during the period
Provision of reserve for reduction entry
Dividends from surplus
Net income
Total changes of items during the period
Balance at the end of current period
Total unitholders’ equity
Balance at the beginning of the period
Changes of items during the period
Dividends from surplus
Net income
Total changes of items during the period
Balance at the end of current period
Valuation and translation adjustments
Deferred gains or losses on hedges
Balance at the beginning of the period
Changes of items during the period
Net changes of items other than owners’ equity(net)
Total changes of items during the period
Balance at the end of current period
Total valuation and translation adjustments
Balance at the beginning of current period
Changes of items during the period

37

82,260,100

82,260,100－
82,260,100－
82,260,100－

49,95849,95849,95849,958－－49,958－49,95849,95849,95849,958－－49,9581,999,419

2,001,377(49,958)(1,949,435)
2,001,351
1,957
2,001,377－(2,001,360)
1,822,632(178,727)
1,822,649

1,999,419

2,051,336－(1,949,435)
2,001,351
51,916
2,051,336－(2,001,360)
1,822,632(178,727)
1,872,608

84,259,519

84,311,436(1,949,435)
2,001,351
51,91684,311,436(2,001,360)
1,822,632(178,727)
84,132,708－(6,909)(6,909)1,732(6,909)(6,909)1,732(5,177)－(6,909)

Net changes of items other than owners’ equity(net)
Total changes of items during the period
Balance at the end of current period
Total net assets
Balance at the beginning of the period
Changes of items during the period
Dividends from surplus
Net income
Net changes of items other than owners’ equity (net)Total changes of items during the period
Balance at the end of current period(6,909)1,732(6,909)(6,909)1,732(5,177)

84,259,519

84,304,526(1,949,435)
2,001,351(6,909)45,00684,304,526(2,001,360)
1,822,632
1,732(176,995)
84,127,531

V. Notes to Financial Statements
Note 1. Premise of the Going Concern
Thirteenth Fiscal Period (Reference)
For the period from May 1, 2012
to October 31, 2012

Fourteenth Fiscal Period
For the period from November 1, 2012
to April 30, 2013

There are none applicable

There are none applicable

Note 2. Significant Accounting Policies

Classification

1.

Method ofDepreciation andAmortization of
Property, etc.

Thirteenth Fiscal Period (Reference)

Fourteenth Fiscal Period

For the period
from May 1, 2012
to October 31, 2012

For the period
from November 1, 2012
to April 30, 2013

(1) Property, Plant and Equipment (including trust (1) Property, Plant and Equipment (including trust
assets)assets)Adopts the straight-line method. Further, theAdopts the straight-line method. Further, theestimated useful lives of the major property, plant
estimated useful lives of the major property, plantand equipment are as follows.
and equipment are as follows.
Building
Structures
Machinery and equipment
Tools, furniture and fixtures2.

Treatment
Method ofDiffered Assets

2~59 years
2~54 years
3~15 years
2~12 years

Building
Structures
Machinery and equipment
Tools, furniture and fixtures

2~59 years
2~54 years
3~15 years
2~12 years(2) Intangible Assets
Adopts the straight-line method.

(2) Intangible Assets
Adopts the straight-line method.

(3) Long-Term Prepaid Expenses
Adopts the straight-line method.

(3) Long-Term Prepaid Expenses
Adopts the straight-line method.

Investment Corporation Bonds Issuance Costs
Amortized on the straight-line method over thematurity period of the bonds

Investment Corporation Bonds Issuance Costs
Amortized on the straight-line method over thematurity period of the bonds

38

3.

Standard for
Posting ofIncome andExpenses

Method of treatment concerning Taxes on Property Method of treatment concerning Taxes on Property
and Equipment
and Equipment
Top REIT adopts the method of treating property
taxes, city planning taxes and depreciable asset
taxes, etc. on owned real estate, etc, as expenses
related to the rent business in the amountcorresponding to the management period out of
the assessed and determined taxation amount.
In addition, as for the acquisition of real estate or
beneficiary interests in trust in real estate, theadjustments equivalent to property tax for theacquired fiscal year paid to the transferor will be
included in acquisition costs, and thus will not berecorded as expenses in the corresponding period.
Furthermore, during the 13th fiscal period, theamount equivalent to the property taxes included
as the acquisition costs of real estate totaled
28,530 thousand yen for Top Residence
Nihonbashi Kayabacyo and Shinkawa Chuo
Building that were acquired in 12th fiscal period.

Top REIT adopts the method of treating property
taxes, city planning taxes and depreciable asset
taxes, etc. on owned real estate, etc, as expenses
related to the rent business in the amountcorresponding to the management period out of
the assessed and determined taxation amount.
In addition, as for the acquisition of real estate or
beneficiary interests in trust in real estate, theadjustments equivalent to property tax for theacquired fiscal year paid to the transferor will be
included in acquisition costs, and thus will not berecorded as expenses in the corresponding period.
Furthermore, during the 14th fiscal period, theamount equivalent to the property taxes included
as the acquisition costs of real estate totaled 4,143
thousand yen

4.

Treatment(lessee)
Method forAmong finance lease transactions other than those
Lease Transaction
recognized as being a transfer of ownership of theleased property to the lessee, equipment leasetransactions with a commencement date whichfalls under the fiscal period that starts before
April 1, 2008 are treated by accounting methods
in accordance with ordinary rent transactions.

－5.

Method of Hedge (1) Method of Hedge Accounting on Deferred
Accounting
Hedge, etc.
Deferred hedge accounting is adopted.
However, special treatment is adopted for thosethat meet the requirements for special treatment
of interest rate swaps.
(2) Hedging Instruments and Hedged Items
Hedging instruments:
Interest rate swap transactions
Hedged items:
Borrowing interest rates(3) Hedging Policy
Top REIT enters into derivative transactions tohedge against risks stipulated in the Articles ofIncorporation in accordance with the financial
policy.
(4) Method for Assessing the Effectiveness of
Hedging
The effectiveness of hedging is assessed bycomparing the cumulative change in hedged
items and the cumulative change in hedging
instruments and then examining the ratio of theamount of change in both.

(1) Method of Hedge Accounting on Deferred
Hedge, etc.
Deferred hedge accounting is adopted.
However, special treatment is adopted for thosethat meet the requirements for special treatment
of interest rate swaps.
(2) Hedging Instruments and Hedged Items
Hedging instruments:
Interest rate swap transactions
Hedged items:
Borrowing interest rates(3) Hedging Policy
Top REIT enters into derivative transactions tohedge against risks stipulated in the Articles ofIncorporation in accordance with the financial
policy.
(4) Method for Assessing the Effectiveness of
Hedging
The effectiveness of hedging is assessed bycomparing the cumulative change in hedged
items and the cumulative change in hedging
instruments and then examining the ratio of theamount of change in both.

39

6.

Other Significant
Items
Fundamental toPreparing the
Financial
Statements(1) Accounting Treatment Method on Trust
Beneficiary Interest in Real Estate as Property in
Trust(1) Accounting Treatment Method on Trust
Beneficiary Interest in Real Estate as Property in
Trust

For the trust beneficiary interest in owned realestate, all accounts of assets and liabilities held in
trust as well as all income generated and expenses
incurred from the trust are recorded in theconcerned items accounts on the balance sheet
and statements of income and retained earnings,
respectively.

For the trust beneficiary interest in owned realestate, all accounts of assets and liabilities held in
trust as well as all income generated and expenses
incurred from the trust are recorded in theconcerned items accounts on the balance sheet
and statements of income and retained earnings,
respectively.

Furthermore, the following significant accounts
are separately stated in the balance sheet for
properties in trust recorded in relevant accounts.

Furthermore, the following significant accounts
are separately stated in the balance sheet for
properties in trust recorded in relevant accounts.

1.Cash and Deposits in trust
2.Building in trust, Structures in trust, machineryand equipment in trust, Tools, furniture andfixtures in trust, other properties in trust, landin trust, other intangible assets in trust
3.Land leasehold right in trust
4.Lease and guarantee deposits in trust
5.Tenant leasehold and security deposits in trust

1.Cash and Deposits in trust
2.Building in trust, Structures in trust, machineryand equipment in trust, Tools, furniture andfixtures in trust, other properties in trust, landin trust, other intangible assets in trust
3.Land leasehold right in trust
4.Lease and guarantee deposits in trust
5.Tenant leasehold and security deposits in trust(2) Accounting Treatment Method of Consumption
Taxes
National and local consumption taxes areaccounted with the consumption taxes excluded.
Furthermore, consumption taxes related toacquisition of properties, which has not been
deducted, is included in the acquisition costs of
the respective properties.

40(2) Accounting Treatment Method of Consumption
Taxes
National and local consumption taxes areaccounted with the consumption taxes excluded.
Furthermore, consumption taxes related toacquisition of properties, which has not been
deducted, is included in the acquisition costs of
the respective properties.

Note 3. Balance Sheet
Thirteenth Fiscal Period (Reference)

Fourteenth Fiscal Period

As of October 31, 2012

As of April 30, 2013

1. Asset Pledged as Collateral and Secured Liabilities

1. Asset Pledged as Collateral and Secured Liabilities

Assets pledged as collateral are as follows.

Assets pledged as collateral are as follows.

(Thousand yen)
2,387,558
81,0838,892,092
11,360,733

Building in trust
Structures in trust
Land in trust
Total(Thousand yen)
2,335,576
78,4108,892,092
11,306,078

Building in trust
Structures in trust
Land in trust
Total

Secured liabilities are as follows.

Secured liabilities are as follows.
(Thousand yen)
719,800

Tenant leasehold and security
deposits in trust
Total

Tenant leasehold and security
deposits in trust
Total

719,800(Thousand yen)
719,800
719,800

2. Minimum Total Net Asset Designated in Article 67-4 in the 2. Minimum Total Net Asset Designated in Article 67-4 in theInvestment Trust and Investment Corporations Law
Investment Trust and Investment Corporations Law
50,000 thousand yen

50,000 thousand yen

Note 4. Statement of Income and Retained Earnings(Thousand yen)

Thirteenth Fiscal Period(Reference)

Fourteenth Fiscal Period

For the period
From May 1, 2012
to October 31, 2012

For the period
From November 1, 2012
to April 30, 2013

A. Revenue related to rent business
Rental and parking revenue

5,268,670

5,107,387

Other lease revenue

336,587

262,613

Other lease business revenue

23,645472,947

Cancellation penalty received

7,321

1,701

5,636,223

5,844,649

Property management costs and fees

392,283

400,198

Utilities expenses

230,976

207,102

Property-related taxes and dues

565,466

564,682

Non-life insurance expenses

9,369

9,446

Repair expenses

46,720522,669

1,116,306

1,121,794

23,13522,704

2,384,258

2,848,597

3,251,965

2,996,051

Total revenue related to rent business
B. Expenses related to rent business:

Depreciation and amortization
Other
Total expenses related to rent business
C. Revenue and expenses of real estate rent business(A − B)

41

Note 5. Unitholders’ Equity
Thirteenth Fiscal Period(Reference)

Fourteenth Fiscal Period

For the period
From May 1, 2012
to October 31, 2012

For the period
From November 1, 2012
to April 30, 2013

Number of issuable investment units
Number of investment units issued and outstanding

2,000,000 units

2,000,000 units

155,000 units

155,000 units

Note 6. Tax Effect Accounting
1. Breakdown of deferred gains or losses by cause(Deferred Tax Assets)(Thousand yen)

Thirteenth Fiscal Period(Reference)

Fourteenth Fiscal Period

For the period
From May 1, 2012
to October 31, 2012

For the period
From November 1, 2012
to April 30, 2013

Current assets
Income taxes – current payable

16

16

3,584

2,686

3,601

2,702

Noncurrent assets
Deferred gains or losses on hedges
Total deferred tax assets(Deferred Tax Liabilities)(Thousand yen)

Thirteenth Fiscal Period(Reference)

Fourteenth Fiscal Period

For the period
From May 1, 2012
to October 31, 2012

For the period
From November 1, 2012
to April 30, 2013

Noncurrent liabilities
Reduction reserves

28,827

28,827

Total deferred tax liabilities

28,827

28,82725,226

26,125(Net deferred tax liabilities)

2. Breakdown by main items that caused differences between the effective statutory tax rate and the effective tax rate
after applying tax effect accounting.

Effective statutory tax rate

Thirteenth Fiscal Period(Reference)

Fourteenth Fiscal Period

For the period
From May 1, 2012
to October 31, 2012

For the period
From November 1, 2012
to April 30, 201336.59%

36.59%(36.57%)(36.57%)

0.03%

0.03%

0.05%

0.05%

(Adjustment)
Deductible cash distributions
Other
Effective tax rate after applying tax effect accounting

42

Note 7. Leases
1. Finance lease transactions other than those recognized as being a transfer of ownership of the leased property to thelesseeAs lessee:(1)Amount equivalent to acquisition value, amount equivalent to accumulated depreciation and amortization, andamount equivalent to the balance at the end of the fiscal period for leased properties
Thirteenth Fiscal Period (Reference)
For the period
From May 1, 2012
to October 31, 2012
AmountAmountAmountequivalent toequivalent toequivalent toaccumulatedbalance atacquisition
depreciation
end of period
value
and
amortization
Machinery and equipment
Total

－
－

－
－

－
－

(Thousand yen)
Fourteenth Fiscal Period
For the period
From November 1, 2012
to April 30, 2013
AmountAmountAmountequivalent toequivalent toequivalent toaccumulatedbalance atacquisition
depreciation
end of period
value
and
amortization

－
－

－
－

－
－

(2) Amount equivalent to the balance of future lease payments at the end of the fiscal period(Thousand yen)
Fourteenth Fiscal Period

Thirteenth Fiscal Period(Reference)
For the period
From May 1, 2012
to October 31, 2012

For the period
From November 1, 2012
to April 30, 2013

－
－
－

－
－
－

Due within 1 year
Due over 1 year
Total(3) Lease fees payable, amount equivalent to depreciation and amortization and amount equivalent to interest
expenses
Thirteenth Fiscal Period (Reference)
For the period
From May 1, 2012
to October 31, 2012

Lease fees payable
Amount equivalent to depreciation andamortization
Amount equivalent to interest expenses(Thousand yen)
Fourteenth Fiscal Period
For the period
From November 1, 2012
to April 30, 2013

329

－

294

－

2

－

(Note) The amounts are shown for Top REIT’s portion. The amounts are rounded down to the nearest thousand yen.

(4) Method for calculating amount equivalent to depreciation and amortization and amount equivalent to interest
expenses
Thirteenth Fiscal Period (Reference)
For the period
From May 1, 2012
to October 31, 2012

Fourteenth Fiscal Period
For the period
From November 1, 2012
to April 30, 2013

• The amounts are calculated by the straight-line
method, with the lease period as the useful life andzero as the residual value.
• The amount equivalent to interest expenses iscalculated as the amount of difference in the total
amount of lease fees and amount posted as leaseassets, with the method for allocation to therespective fiscal periods based on the interest
method.

－43

Note 8. Financial Instruments
Effective from the fiscal period ended October 31, 2010, Top REIT adopted the revised Accounting Standard,“Accounting Standard for Financial Instruments” (Accounting Standards Board of Japan (“ASBJ”) Statement
No.10 revised on March 10, 2080) and the “Guidance on Disclosures about Fair Value of Financial Instruments”(ASBJ Guidance No.19 revised on March 10, 2080).
Information on financial instruments for the periods ended October 31, 2012 and April 30, 2013 required pursuant
to the revised accounting standards are as follows:
1. Matters Concerning Status of Financial Instruments(1) Policy for financial instruments
Top REIT procures necessary funds through bank loans, issuance of investment corporation bonds andissuance of investment units, with the aim of contributing to steady growth of assets managed and stableearnings from a mid-and long-term view in accordance with the financial policy stated by the asset manager.
Although management of surplus funds by using financial instruments targeting securities, monetary claims,
etc. in accordance with the investment limitations stipulated in the Articles of Incorporation, as a general rule,the surplus funds are managed by placing them in deposit.
Furthermore, derivative transactions shall be limited to those for the purpose of hedging interest rate
fluctuation risk and other risks in accordance with the investment limitations.
(2) Financial Instruments, Their Risks and Risk Management System
Top REIT and Top REIT Asset Management, Co., Ltd. (TRAM), the asset management company of Top REIT,
strive for advancing risk management through regular inspection of the adequacy and effectiveness of risk
management systems. Top REIT and TRAM adopt the structure that inspects various risks regularly andreflects the results of inspection on the risk management plan and the management plans. In addition, Top
REIT and TRAM inspect risks and reflect the results of inspection in the decision-making in a timely manner
through various transactions.
Top REIT and TRAM strive for risk management based on the incorporation rules of the asset manager
concerning individual financial instruments and their risks, and risk management system.
Credit risk concerning deposit and derivative transaction
Deposits, especially time deposits of large amounts, are used for investment of Top REIT’s surplus funds,
these deposits are exposed to credit risk of bankruptcy of the depository financial institutions and others.
Top REIT minimizes the risk through such measures as limiting them to short term deposits and setting
the standard of credit rating for depository financial institutions and establishing rules for the ceilingamounts of deposit. Derivative transactions are exposed to credit risks of transaction parties, Top REIT
limits credit risks by setting the standard of credit rating in transaction financial institutions and putting
in place a structure to monitor deals, the amount of estimated values and credit status of transaction
partners.
② Market risk concerning loans
Proceeds from loans and investment corporation bonds are used mainly to acquire real estate properties
and refinance existing loans and bonds.
Loans, especially floating-rate borrowings, are exposed to market risks, Top REIT manages to hedge
against interest-raising risk by fixed-rate interests entered into interest swap transactions and setting thetarget of fixed- rate interest ratios. In addition, when procuring new loans and refinancing, Top REIT
inspects interest-raising risks and studies borrowing methods that minimize risks. For the hedging
instruments and hedged items, hedging policy, method for assessing the effectiveness of hedging, etc. inhedge accounting, please refer to “5. Methods of Hedge Accounting” under “Note 2. Significant
Accounting Policies” above.

①③

Liquidity risk concerning borrowings and tenant leasehold used in cash flow, etc
Borrowings, investment corporation bonds and tenant leasehold are exposed to liquidity risk at the timeof repayment of borrowing, redemption of investment corporation bonds and return of tenant leaseholds,
but Top REIT manages these risks by preparing monthly fund management plans. In addition, Top
REIT has established a management system for identifying liquidity risks regularly and at the time ofvarious transactions by calculating the total amount of payments assumed, which is arrived at by taking
the total amount of borrowings and tenant leaseholds, etc. that are to become due for repayment in thefiscal period and adding forecast dividends, and conducting a comparative inspection with liquidity on
hand that factors in the liquidity of portfolio real estate properties and other assets under management.

(3) Supplemental Explanation About the Fair Value of Financial Instruments
The fair value of financial instruments is based on the quoted market price, if applicable. When there is noquoted market price available, fair value is reasonably estimated. Certain assumptions are used for the44

estimation of fair value. Accordingly, the result of such estimation may change if different assumptions areused. Furthermore, the contractual amounts of derivative transactions stated in “2. Matters Concerning
Estimated Fair Value, etc. of Financial Instruments” below do not represent the market risk involved inthese derivative transactions.
2. Matters Concerning Estimated Fair Value, etc. of Financial Instruments
For the period from May 1, 2012 to October 31, 2012 (13th fiscal period) (Reference)
The following table includes the book value, fair value and valuation difference of financial instruments as of
October 31, 2012. The financial instruments that are recognized to be extremely difficult to estimate the fairvalue are not included in the table. (Please refer to Note 2).
(Thousand yen)

As of October 31, 2012
Book value

Fair value

Difference(1)

Cash and deposits

2,306,624

2,306,624－(2)

Cash and deposits in trust

4,538,595

4,538,595－

6,845,219

6,845,219－

19,235,000

19,255,366

20,3668,500,000

8,563,750

63,75069,167,500

69,609,387

441,887

415,658

415,658－

97,318,158

97,844,162

526,004(10,525)(10,525)－(10,525)(10,525)－

Total assets
Current portion of long-term loans
payable(4) Investment corporation bond
(3)

(5)
(6)

Long-term loans payable
Tenant leasehold anddeposits in trust
Total liabilities

security

Derivative transactions (*1)
Applied hedge accounting
Total derivative transactions(*1): The value of assets and liabilities arising from derivative transactions is shown in net value, with amount inparentheses representing the net liability position.

(Note1) Methods for calculating the fair value of financial instruments and matters related to derivativetransactions
Assets(1) Cash and deposits, and(2) Cash and deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as thebook value and is thus stated at that book value.
Liabilities(3) Current portion of long-term loans payable, and(5) Long-term loans payable
For long-term loans payable with floating interest rates, the fair value would be almost equal to thebook value because such loans reflect the market interest rate in a short-term period and thus are
based on the concerned book value.
For fixed-rate long-term loans payable, the fair value is the present value calculated by discounting
he sum total amount of its principal and interest payment on a rate reasonably estimated to be
applicable to similar long-term loans.
Furthermore, the fair value of long-term loans payable that qualifies for the special treatment ofinterest-rate swap (refer to Derivative Transactions below) is the present value calculated by thediscounted sum total of its principal and interest payments net calculated from the interest-rate
swap on a rate reasonably estimated to be applicable to similar fixed-rate long-term loans.
(4) Investment corporation bonds
The fair value of investment corporation bonds issued by Top REIT is based on reference trading
statistics of the Japan Securities Dealers Association.

45

(6) Tenant leasehold and security deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as thebook value and is thus stated at that book value.
Derivative Transactions
Hedge accounting applied
The following are the contract values or values corresponding to the principal amounts as stipulated
by contracts for derivative transactions as of date of settlement for each hedge accounting method
applied.
(Thousand yen)Hedge
accounting
methodPrincipal
treatment
methodType of
Hedge item
derivativetransactions
Interest rate swap Long-term
Pay fixed /loans
payablereceive floating

SpecialInterest rate swap Long-term
treatment of
Pay fixed /loansinterest-rate receive floating
payableswaps

Contract amountMore than
one year
8,500,000

Fair
value

Method of calculating
the fair value

Calculated on value
8,500,000 (10,525) provided bycounterparty financial
institution

25,000,000 18,700,000

(*2)

―

(*2) Since the derivative transactions accounted by special treatment of interest-rate swaps are treated as one transaction
together with long-term loans payable which is the hedged item, the fair value is included in the fair value of the said
long-term loans payable (refer to Note 1(5)).

(Note 2) Financial instruments which are recognized to be extremely difficult to estimate the fair value of are as
follows(Thousand yen)
Item
Tenant leasehold and security deposits in trust (*3)
TotalCarrying value
5,096,941
5,096,941(*3) Tenant leasehold and security deposits in trust which excluded the above (6) are not subject to fair value disclosure
because arriving at the fair value is extremely difficult due to the fact that the contract termination period, which is therepayment date, is difficult to reasonably estimate as leases may be cancelled, renewed or re-signed even if a lease term
is set in the lease contract, making a reasonable estimate of future cash flows difficult.

(Note 3) Redemption Schedule amount for Monetary Claims after the end of the period(Thousand yen)
Due within one year
2,306,624
4,538,595
6,845,219

Cash and deposits
Cash and deposits in trust
Total(Note 4) Repayment Schedule amount for Investment Corporation Bonds and Long-Term Loans Payable after
the end of the period(Thousand yen)
Due after
Due after
Due after
Due after
Due within
Due after
one to two
two tothree tofour to five
one yearfive years
years
three years
four yeas
years
Investment
corporation
bonds

－

－

8,500,000－－－

Long-term
loans
payable19,235,000

4,135,000

135,000

26,535,000

38,362,500

－

Total

19,235,000

4,135,000

8,635,000

26,535,000

38,362,500－

46

For the period from November 1, 2012 to April 30, 2013 (14th fiscal period)
The following table includes the book value, fair value and valuation difference of financial instruments as ofApril 30, 2013. The financial instruments that are recognized to be extremely difficult to estimate the fair value
are not included in the table. (Please refer to Note 2).
(Thousand yen)
As of April 30, 2013
Book value(1)

Cash and deposits(2)

Fair value

Difference

520,404

520,404－

Cash and deposits in trust

4,180,585

4,180,585－

Total assets(3) Current portion of long-term loans
payable(4) Investment corporation bond

4,700,990

4,700,990－

135,000

136,5241,524

8,500,000

8,562,050

62,05087,430,000

87,925,986

495,986

75,87075,870－96,140,870

96,700,431

559,560(7,901)(7,901)－(7,901)(7,901)－(5) Long-term loans payable(6) Tenant leasehold and security
deposits in trust
Total liabilities
Derivative transactions (*1)
Applied hedge accounting
Total derivative transactions(*1): The value of assets and liabilities arising from derivative transactions is shown in net value, with amount inparentheses representing the net liability position.

(Note1) Methods for calculating the fair value of financial instruments and matters related to derivativetransactions
Assets(1) Cash and deposits, and(2) Cash and deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as thebook value and is thus stated at that book value.
Liabilities(3) Current portion of long-term loans payable, and(5) Long-term loans payable
For long-term loans payable with floating interest rates, the fair value would be almost equal to thebook value because such loans reflect the market interest rate in a short-term period and thus are
based on the concerned book value.
For fixed-rate long-term loans payable, the fair value is the present value calculated by discounting
he sum total amount of its principal and interest payment on a rate reasonably estimated to be
applicable to similar long-term loans.
Furthermore, the fair value of long-term loans payable that qualifies for the special treatment ofinterest-rate swap (refer to Derivative Transactions below) is the present value calculated by thediscounted sum total of its principal and interest payments net calculated from the interest-rate
swap on a rate reasonably estimated to be applicable to similar fixed-rate long-term loans.
(4) Investment corporation bonds
The fair value of investment corporation bonds issued by Top REIT is based on reference trading
statistics of the Japan Securities Dealers Association.
(6) Tenant leasehold and security deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as thebook value and is thus stated at that book value.

47

Derivative Transactions
Hedge accounting applied
The following are the contract values or values corresponding to the principal amounts as stipulated
by contracts for derivative transactions as of date of settlement for each hedge accounting method
applied.
(Thousand yen)Hedge
accounting
methodPrincipal
treatment
methodType of
Hedge item
derivativetransactions
Interest rate swap Long-term
Pay fixed /loans
payablereceive floating

SpecialInterest rate swap Long-term
treatment of
Pay fixed /loansinterest-rate receive floating
payableswaps

Contract amountMore than
one year
8,500,000

Fair
value

8,500,000

18,700,000 18,700,000

Method of calculating
the fair value

Calculated on value(7,901) provided bycounterparty financial
institution(*2)―(*2) Since the derivative transactions accounted by special treatment of interest-rate swaps are treated as one transaction
together with long-term loans payable which is the hedged item, the fair value is included in the fair value of the said
long-term loans payable (refer to Note 1(5)).

(Note 2) Financial instruments which are recognized to be extremely difficult to estimate the fair value of are as
follows(Thousand yen)
Item
Tenant leasehold and security deposits in trust (*3)
TotalCarrying value
5,210,650
5,210,650(*3) Tenant leasehold and security deposits in trust which excluded the above (6) are not subject to fair value disclosure
because arriving at the fair value is extremely difficult due to the fact that the contract termination period, which is therepayment date, is difficult to reasonably estimate as leases may be cancelled, renewed or re-signed even if a lease term
is set in the lease contract, making a reasonable estimate of future cash flows difficult.

(Note 3) Redemption Schedule amount for Monetary Claims after the end of the period(Thousand yen)
Due within one year
520,404
4,180,585
4,700,990

Cash and deposits
Cash and deposits in trust
Total(Note 4) Repayment Schedule amount for Investment Corporation Bonds and Long-Term Loans Payable after
the end of the period(Thousand yen)
Due within
one year

Due after
one to twoyears

Due after
two tothree years

Due after
three tofour yeas

Due after
four to fiveyears

Due after
five years

Investment
corporation
bonds

－

－

8,500,000－－－

Long-term
loans
payable135,000

4,135,000

33,610,000

23,930,000

25,755,000

－

Total

135,000

4,135,000

42,110,000

23,930,000

25,755,000－

48Note 9. Investment and Rental Properties
Top REIT owns in the portfolio certain office buildings (including land), etc. located in Tokyo and other areas
which are for lease.
The following table is the amount posted on the balance sheet, amounts of increase (decrease) during the previous
period and fair value of these investment and rental properties as of the settlement date.
For the period from May 1, 2012 to October 31, 2012 (13th fiscal period) (Reference)(Thousand yen)Book value
Balance at the
beginning of the period
181,405,484

Change during the period(959,154)

Balance at the end of
the period
180,446,329

Fair value at end of theperiod173,800,000(Note 1) Summary of corresponding investment and rental properties are presented in “3-Status of Investment Assets.”(Note 2) Book value represents the acquisition cost less accumulated depreciation and amortization.
(Note 3) Of the amounts of increase (decrease) during the current period for investment and rental properties, the amount of
increase is primarily attributable to capital expenditures, and decrease is mainly due to the depreciation andamortization.
(Note 4) Fair value at the end of the period is the appraisal value as appraised by an outside real estate appraiser.

Furthermore, loss and profit concerning investment and rental properties for fiscal period ended October 31, 2012 ispresented in “Note 4. Statement of Income and Retained Earnings.”
For the period from November 1, 2012 to April 30, 2013 (14th fiscal period)(Thousand yen)Book value
Balance at the
beginning of the period
180,446,329

Change during the period
557,301

Balance at the end of
the period
181,003,631

Fair value at end of theperiod172,360,000(Note 1) Summary of corresponding investment and rental properties are presented in “3-Status of Investment Assets.”(Note 2) Book value represents the acquisition cost less accumulated depreciation and amortization.
(Note 3) Of the amounts of increase (decrease) during the current period for investment and rental properties, the amount of
increase is primarily attributable acquisition of MEL Building (1,235,619 thousand yen), and decrease is mainly
due to the depreciation and amortization.
(Note 4) Fair value at the end of the period is the appraisal value as appraised by an outside real estate appraiser.

Furthermore, loss and profit concerning investment and rental properties for fiscal period ended April 30, 2013 ispresented in “Note 4. Statement of Income and Retained Earnings.”

49

Note 10. Transactions with Interested Parties
For the period from May 1, 2012 to October 31, 2012 (13th fiscal period) (Reference)
Attribution

Company
nameInterested
Party

Japan
Trustee
Services
Bank,Ltd.

Ratio ofBusiness investment
description held among units
totalor
number ofoccupation investment
units

Banking

18.49%(Note 2)Type oftransaction

Rent revenue,
etc(Note 3)

Sumitomo
Mitsui
Trust
Banking
Bank,
Limited.

Item in balance
sheets7,615

Advances
received

72,16063,979 Accounts
payable-other

Trust fee

15,138Other fees paid

1,303 Operating
accounts
payable
1,250

Other
non-operating
2.05% expenses

Borrowing
related expenses

Investment
corporationbond related
expenses

Balance atperiod end(thousand yen)
(Note 1)

Operatingaccounts
96,622 receivable

Administrative
service fee

Property
management
expenses

Interested
Party and
AssetscustodianAmount oftransaction(thousand yen)
(Note 1)

58,048―Long-term
prepaid
342 expenses

1,500

Prepaid
expenses

720

Long-term
prepaid
57,544 expenses

220,700

Prepaid
expenses

80,053

Accounts
payable-other54

624 Investment
corporation
2,990
bond issuance
expenses(Note 1) Consumption tax, etc. are excluded from the amounts of transactions. Consumption tax, etc. are included in thebalances at end period, but excluded only for investment corporation bond issuance costs. Furthermore, transaction
terms are determined based on prevailing market conditions.
(Note 2) The described above ratio was held to trust accounts.
(Note 3) The described above rent revenues, etc. include rents and common service revenue as well as related utilities
revenue, additional facilities use revenue and parking revenue.

50

For the period from November 1, 2012 to April 30, 2013 (14th fiscal period)
Attribution

Company
nameInterested
Party

Japan
Trustee
Services
Bank,Ltd.

Interested
Party and
AssetscustodianRatio ofBusiness investment
description held among units
totalor
number ofoccupation investment
units

Banking

Sumitomo
Mitsui
Trust
Banking
Bank,
Limited.

25.15%(Note 2)Type oftransaction

Rent revenue,
etc(Note 3)

Amount oftransaction(thousand yen)
(Note 1)

Item in balance
sheetsBalance atperiod end(thousand yen)
(Note 1)

Operatingaccounts
531,391 receivable

6,936

Advances
received

68,255Administrative
service fee

64,413 Accounts
payable-otherBrokerage fee

10,000Trust fee

15,125

Other fees paid

Operating
1,429 accounts
payableProperty
management
expenses

1,250―

Long-term
prepaid
342 expenses

1,140

Prepaid
expenses

720

Long-term
prepaid
56,662 expenses

227,315

Prepaid
expenses

96,251Other
non-operating
2.04% expenses

Borrowing
related expenses

57,921

Accounts
payable-other

Investment
corporationbond related
expenses53

623 Investment
corporation
2,429
bond issuance
expenses(Note 1): Consumption tax, etc. are excluded from the amounts of transactions. Consumption tax, etc. are included in
the balances at end period, but excluded only for investment corporation bond issuance costs.
Furthermore, transaction terms are determined based on prevailing market conditions.
(Note 2): The described above ratio was held to trust accounts.
(Note 3): The described above rent revenues, etc. include rents and common service revenue as well as related utilities
revenue, additional facilities use revenue and parking revenue.

Note 11. Per Unit Information
Thirteenth Fiscal Period

Fourteenth Fiscal Period

For the period
from May 1, 2012
to October 31, 2012

For the period
from November 1, 2012
to April 30, 2013

Net Assets per Unit

543,900 yen

Net Assets per Unit

542,758 yen

Net Income per Unit

12,912 yen

Net Income per Unit

11,759 yen

Diluted net income per unit has not been presented since
there are no outstanding warrants or convertible bonds.
(Note)

Diluted net income per unit has not been presented since
there are no outstanding warrants or convertible bonds.

The per unit amounts are rounded to the nearest yen.

51

(Note)Base of calculation of net income per unit is as follows:
Thirteenth Fiscal Period

Fourteenth Fiscal Period

For the period
from May 1, 2012
to October 31, 2012

For the period
from November 1, 2012
to April 30, 2013

Net Income (thousand yen)

2,001,351

1,822,632

Amounts not attributable to ordinary unitholders(thousand yen)――

Net income attributable to ordinary investment
unit (thousand yen)

2,001,351

1,822,632

Weighted-average number of units during theperiod (unit)

155,000

155,000

Note 12. Significant Subsequent Events
Thirteenth Fiscal Period

Fourteenth Fiscal Period

For the period
from May 1, 2012
to October 31, 2012

For the period
from November 1, 2012
to April 30, 2013

There are none applicable.

There are none applicable.

52VI. Statements of Cash Dividend Distributions

Classification

I. Unappropriated retained earnings
II. Total Amount of Dividends(Dividend per unit)
III. Retained earnings brought forward

Thirteenth Fiscal Period
For the period
from May 1, 2012
to October 31, 2012
Amount(yen) (Note 1)
2,001,377,610
2,001,360,000(12,912)
17,610Fourteenth Fiscal Period
For the period
from November 1, 2012
to April 30, 2013
Amount(yen) (Note 2)
1,822,649,910
1,822,645,000(11,759)
4,910

Note 1: In accordance with the “cash distribution policy” stipulated in Article 34 of the Articles of Incorporation, the amounts ofdividends are limited to the amounts of income. The article also stipulates the policy that “Top REIT shall distribute amountin excess of the amount equivalent to 90% of its distributable profits as stipulated in Article 67-15 of the Special Taxation
Measures Law.” Based on these policies, Top REIT decided on a total distribution of 2,001,360,000 yen as distribution ofincome for the period. This is the maximum value arrived at when the number of units issued and outstanding (155,000
units) is multiplied by an integer, within the limit of the balance of unappropriated retained earnings for the fiscal period.
Furthermore, Top REIT does not make cash distributions in excess of the profit as stipulated in Article 34-2 of the
Articles of Incorporation.
Note2: In accordance with the “cash distribution policy” stipulated in Article 34 of the Articles of Incorporation, the amounts ofdividends are limited to the amounts of income. The article also stipulates the policy that “Top REIT shall distribute amountin excess of the amount equivalent to 90% of its distributable profits as stipulated in Article 67-15 of the Special Taxation
Measures Law.” Based on these policies, Top REIT decided on a total distribution of 1,822,645,000 yen as distribution ofincome for the period. This is the maximum value arrived at when the number of units issued and outstanding (155,000
units) is multiplied by an integer, within the limit of the balance of unappropriated retained earnings for the fiscal period.
Furthermore, Top REIT does not make cash distributions in excess of the profit as stipulated in Article 34-2 of the
Articles of Incorporation.

Disclaimer:
The accompanying English financial information, comprising of balance sheets, statements of retained
earnings, statements of changes in unitholders’ capital, notes to financial information and statements of cash
dividends, have been translated from the Japanese financial statements of Top REIT prepared in accordancewith the Law Concerning Investment Trusts and Investment Corporations of Japan.
Under Article 130 of the Law Concerning Investment Trusts and Investment Corporations of Japan, theJapanese financial statements for the fiscal period ended April 30, 2013 have been audited by KPMG AZUSA,
in accordance with auditing standards generally accepted in Japan. However, this English translation of theJapanese language report of independent auditors is not attached herein because the accompanying English
translation of balance sheets, statements of retained earnings, statements of changes in unitholders’ capital,
notes to financial information and statements of cash dividends are unaudited.

53

VII. Statements of Cash Flows (Reference Information)(Unit: thousand yen)
Thirteenth Fiscal Period(May 1, 2012 –October 31, 2012)
Net cash provided by (used in) operating activities
Income before income taxes
Depreciation and amortization
Amortization of trademark
Amortization of investment corporation bond issuance costs
Interest income and interest on securities
Interest expenses
Decrease (increase) in operating accounts receivable
Decrease (increase) in consumption taxes refund receivable
Decrease (increase) in income taxes receivable
Decrease (increase) in prepaid expenses
Increase (decrease) in operating accounts payable
Increase (decrease) in accounts payable – other
Increase (decrease) in accrued consumption taxes
Increase (decrease) in advances received
Decrease (increase) in long-term prepaid expenses
Other, net
SubtotalInterest income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Purchase of property, plant and equipment in trust
Repayments of tenant leasehold and security deposits
Proceeds from tenant leasehold and security deposits in trust
Repayments of tenant leasehold and security deposits in trust
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Increase in short-term loans payable
Decrease in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Dividends paid
Net cash provided by (used in) financing activities

2,002,299
1,116,306
21
5,511(1,448)546,518（5,590）608
150（27,309）(14,939)
14,526
102,725
141,449（76,152）（23,270）
3,781,407

1,823,578
1,121,794
21
5,511(1,346)
480,312
8,398

1,448
（594,264）（826）
3,187,764

1,346(523,755)(931)
2,470,191(70,500)
70,500（10,058）（264,006）(18,586)
66,667（67,971）（293,955）(192,000)
192,000(4,642)(1,519,956)(24,885)
251,829(477,907)(1,775,561)－(55,845)
32,816(7,612)(81,983)(219,570)(93,389)(19,154)
2,993,532

17,500,000（17,567,500）（1,949,435）(2,016,935)
876,874
5,968,345
6,845,219(2,144,229)
6,845,219
4,700,990

－

54

－

2,800,000(2,800,000)
18,330,000(19,167,500)(2,001,360)(2,838,860)－

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

Fourteenth Fiscal Period(November 1, 2012 –April 30, 2013)

Note Concerning Significant Accounting Policy [Reference Information]

Classification

Scope offunds instatementsof cash flows

Thirteenth Fiscal Period
For the period
from May 1, 2012
to October 31, 2012
Funds (cash and cash equivalents) in statements ofcash flows consist of cash on hand and cash in trust,deposits placed with banks and deposits in trust thatcan be withdrawn at any time, and short-term
investments that are highly liquid and easily
convertible to cash, have a low risk of pricefluctuation and mature within three months from thedate of purchase.

Fourteenth Fiscal Period
For the period
from November 1, 2012
to April 30, 2013
Funds (cash and cash equivalents) in statements ofcash flows consist of cash on hand and cash in trust,deposits placed with banks and deposits in trust thatcan be withdrawn at any time, and short-term
investments that are highly liquid and easily
convertible to cash, have a low risk of pricefluctuation and mature within three months from thedate of purchase.

Note Concerning Statements of Cash Flows [Reference Information]*1.

Thirteenth Fiscal Period
For the period
from May 1, 2012
to October 31, 2012
Reconciliation of cash and cash equivalents at end of
period and amount of items presented in balance
sheetsCash and deposits
Cash and deposits in trust
Cash and cash equivalents

Fourteenth Fiscal Period
For the period
from November 1, 2012
to April 30, 2013
*1. Reconciliation of cash and cash equivalents at end of
period and amount of items presented in balance
sheets(as of October 31, 2012)(Unit: thousand yen)
2,306,624
4,538,595
6,845,219

Cash and deposits
Cash and deposits in trust
Cash and cash equivalents

Stock and Unitholders Information55(as of April 30, 2013)(Unit: thousand yen)
520,404
4,180,585
4,700,990

No. of Units Held

12th Fiscal Period
Total number of units
issued andoutstanding at end of
period: 155,000

Individuals / other:
21,159 [13.7%]

Other domestic corporations:
13,264 [8.6%]

Individuals / other:
24,392 [15.7%]

13th Fiscal Period
Total number of units
issued andoutstanding at end of
period: 155,000

Overseas
corporations /individuals:
19,218 [12.4%]

Financial institutions (incl. securities firms):
101,359 [65.4%]

Other domestic corporations:
13,572 [8.8%]
Overseas
corporations /individuals:
22,600 [14.6%]

Financial institutions (incl. securities firms):
94,436 [60.9%]

14th Fiscal Period
Total number of units
issued andoutstanding at end of
period: 155,0000%Individuals / other:
24,296 [15.7%]

Other domestic corporations:
12,250 [7.9%]
Overseas
corporations /individuals:
17,023 [11.0%]

Financial institutions (incl. securities firms):
101,431 [65.4%]

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

90%

100%

No. of Unitholders
Financial institutions (incl. securities firms):
Other domestic corporations:
Overseas corporations / individuals:

99 [1.4%]
140 [2.0%]
90 [1.3%]

Financial institutions (incl. securities firms):
Other domestic corporations:
Overseas corporations / individuals:

106 [1.4%]
154 [2.0%]
108 [1.4%]

12th Fiscal Period
Total number of
Individuals / other 6,583[95.2%]
unitholders at endof period: 6,912

13th Fiscal Period
Total number of Individuals / other 7,455[95.3%]
unitholders at endof period:7,823
Financial institutions (incl. securities firms):
Other domestic corporations:
Overseas corporations / individuals:
14th Fiscal Period
Total number of
Individuals / other 7,510[95.4%]
unitholders at endof period:7,872

0%

10%

20%

30%

40%

56

50%

60%

98 [1.2%]
151 [1.9%]
113 [1.4%]70%80%